KPMG Brasil - IT ADVISORY ExploringGlobalFrontiers · 2009-08-27 · In the short term, the race...
Transcript of KPMG Brasil - IT ADVISORY ExploringGlobalFrontiers · 2009-08-27 · In the short term, the race...
Exploring�Global�FrontiersThe�New�Emerging�Destinations
ADVISORY
IT ADVISORY
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
ForewordAlan BuckleGlobal�Partner-in-Charge,�Advisory
The current global financial crisis has been peppering conversations not only at manybusiness meetings, but sometimes even at the family dinner table. While everyone hastheir own opinions and theories, realistically it is nearly impossible to predict what willhappen. If anything, the so called “global financial crisis” drives home the fact thateconomies no longer exist in isolation.
Governments are actively collaborating with industries and providing bailout packages inan attempt to minimize the fallout. On the other hand, businesses are doing what theysee fit to be competitive during the economic downturn. Cost reduction is the newbuzzword, and as advisors we are increasingly being asked questions on how enterprisescan reduce costs without impacting efficiency and longer term growth prospects.
In the short term, the race for business survival takes top priority. However, over thelonger run, companies are likely to pursue rationalization measures. In the InformationTechnology (IT) - Business Process Outsourcing (BPO) industry, these measures are likelyto focus the search for lower cost business alternatives globally, that could also allowcompanies to provide diversity to their global operations.
Access to global opportunities is generally getting easier. Enterprises moving offshore notonly benefit from lower costs and access to a diversified talent pool, but also have theadded “first-mover” advantage if they tap relatively unexplored cities. They can alsoacquire various incentives such as government grants due to a heavier hand at thenegotiation table as "first-movers".
This publication aims to provide an overview of the options that are available forenterprises who would like to set up a shared services center, or outsourcing companiessetting up operations in locations beyond their existing locations. Though the "establishedlocations" may still be considered as the epicenters of outsourcing, entities are beginningto look at other alternative locations due to a variety of drivers that we outline in thispublication. We hope that this publication will prove valuable to your business decisions.
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Globe trotting is a familiar term today, not only to an avid traveler, but also to growing ITand BPO enterprises. Rapid Gross Domestic Product (GDP) growth in developing countriesin the last few years has been a motivating force for globalization. Countries in thedeveloping markets are offering lower cost destinations for outsourcing services, and alsoaccess to their markets which have high growth potential.
A favorable business environment, access to a good supply of talent, good quality of lifeand lower costs are some of the factors that are being sought out by IT-BPO companiesinvesting in emerging locations.
As the existing favorite locations start to become saturated, newer cities are emerging,offering “new and improved” incentive packages and talent, that is better geared for theoutsourcing industry. Our choice of 31, though dominated by cities in developingcountries, also includes some onshore or near-shore developed city-country pairs, that webelieve may also be valid competitive alternatives to the existing favorite locations suchas Bangalore and Chennai.
Some of these destinations are hot tourist spots, and therefore, are more visible on theworld map. Then there are other locations which are relatively unheard of, but are seeingtraction as they have historically had a good education system and are working onimproving their infrastructure.
Governments keen to get a piece of the outsourcing pie, are offering various incentiveprograms to bring IT-BPO business to their countries. Some cities are also becomingactively involved, independently promoting their capabilities and available programs. Tocreate a “unique selling point”, specific services such as accounting, research anddevelopment, and animation are being promoted.
The options available are immense, and “the world is my playground” is an appropriateexpression in the outsourcing industry today. However, it is imperative for enterprisescomparing the alternatives to consider the risks and rewards associated with theemerging locations versus the more established locations. A “one-size-fits-all” strategymay not be appropriate with location selection. Companies should consider their needs,and align their vision with what different locations offer when considering their locationassessment strategy.
Egidio ZarrellaGlobal�Partner-in-Charge,�IT�Advisory
Introduction
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1. The Importance of Location Selection 1
2. Executive Summary 3
3. Emerging Destinations - AMERICAS 7
4. Emerging Destinations - ASPA C 43
5. Emerging Destinations - EMA 79
6. Glossary & Key Terms 128
Table ofContents
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Selecting an optimum location for a new investment is a critical issue in all industries, regardless of the size of the company, or the typeof operation that it is planning to establish. Being in the right location is as important for the automotive or electronics OriginalEquipment Manufacturer (OEM) that is considering where to establish a new billion-dollar manufacturing plant, as it is for thebiotechnology start-up considering where to locate its clinical trials or development operations. Although the specific criteria may varyacross companies and industries, the overall process for selecting a new location tends to be similar, and this process has been refinedover the years.
Within the IT-BPO industry, the approach to selecting locations has developed its own set of processes and practices. To start with, thereseems to be a strong focus on workforce availability and costs, often at the expense of other factors. This is not surprising given theimportance of skills and salaries to IT-BPO operations. The availability of skilled employees is critical to the success of a new softwaredevelopment center or BPO delivery facility. Similarly, a labor pool that is large enough to accommodate the anticipated levels ofworkforce turnover and future growth is essential for companies planning to establish operations of significant scale.
However, even the best workforce cannot compensate for inadequate telecommunications infrastructure that require companies toinvest millions of dollars in dedicated lines and redundancies. Similarly, some cities with a large and affordable skill pools, lack moderncommercial real estate required to house sophisticated IT operations. Local political conditions and business practices in some locationsmay make setting up and running a business a costly and frustrating experience. A large number of graduates in itself does not imply theavailability of adequate skills, as the quality of education systems and level of graduate preparedness among universities and collegescan vary tremendously, even within the same city or country. Although these and other factors are considered to varying degrees in mostlocation analyses, their importance and potential impact on costs and ease of operations is often underestimated.
A large number of location studies usually compare entire countries, brushing over the significant differences among cities within largeand diverse countries such as India, Russia, Brazil or even the Ukraine. While the country level ranking may provide a convenient startingpoint for further analysis, using them as a basis for making strategically important location and investment decisions may be risky.
Location decision making within the IT-BPO sector has also become characterized by a rapidly changing landscape, and a quest todiscover new locations where competitors have not yet ventured, and the labor market remains unexploited. Examples abound of citiesthat have been moved from being virtually “untapped” to “saturated” in a few short years, as companies enter to benefit from theavailable and affordable workforce. As word spreads, “crowding-out” sets in, with tightening labor markets, rapidly rising costs andstrained infrastructure leading some companies to set out in search of new opportunities. While similar phenomena exist in othersectors, this has been repeatedly demonstrated in the IT-BPO sector’s search for new offshore or near-shore locations in recent years.In general, while companies in the IT-BPO sector have high expectations for investment locations, they often underestimate the processneeded for getting to the right result.
The Importance of
1
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
There are few “short-cuts” to finding the right location, and although all eventualities cannot always be considered in advance, a basiclocation analysis should adhere to the following basic principles in order to increase the probability of yielding the optimal result.
NeedsRequirements should be accurately defined and articulated in a manner that reflects the company’s requirements. What skills do weneed? How can our requirements be measured to some degree of accuracy? Are we considering all the important aspects of ourbusiness? How can we choose location criteria that anticipate changing conditions in the investment environment or our ownbusiness?
PrioritiesDefined needs should be weighted to reflect the specific preferences of the company. This requires a process that is bothmethodologically sound while generating consensus from key stakeholders regarding project priorities. Simply scoring criteria on ascale of 1 to 10 or using “off-the-shelf” weightings that reflect the preferences of other companies do not adequately capture anindividual project’s specific situation and requirements.
CompromiseExpectations regarding project deliverables should be realistic. Companies tend to want the “perfect” location – skilled labor, lowcosts, state-of-the art infrastructure and an accommodating government and business environment. The bad news is that the perfectlocation does not exist – there are always trade offs, and companies must be clear about how much of “factor A” (say costs) they arewilling to give up for a little more of “factor B” (say ease of doing business). Expectations regarding timing should also be realistic.
Site Visit:In the age of online databases and freely available country rankings, it is easy to underestimate the difficulty of obtaining reliable andaccurate data. There are no online databases comparing the graduate output of various universities across India. Neither is there areliable source of labor cost information for IT programmers in central and eastern European cities. Information of this type can onlybe obtained through thorough primary research, which involves gathering accurate data through conversations with people on theground that are familiar with the relevant investment conditions. Do not underestimate the value of a site visit and conversations withother experienced business people conducting business in that location. For example, local business groups, professional associationsand chambers of commerce
Location Specific DataFinally, the analysis should always focus on cities and not countries. Although country level information may be helpful with respect tofactors such as business regulations, tax and overall industry size, the real factors affecting the ability to set up and operate abusiness vary significantly at the city level. As indicated above, using country level data to compare countries such as India or Russiais unrealistic and blurs the often immense differences in costs and conditions between cities. Even within countries as seeminglysmall or homogenous as the Philippines, labor costs can vary significantly across cities. One reason why so many studies tend tocompare countries rather than cities is that accurate information on cities is simply more difficult to find.
Location Selection
2
©�2009�KPMG�International�is�a�Swiss�cooperative.Member�firms�of�the�KPMG�network�of�independentfirms�are�affiliated�with�KPMG�International.�KPMG
The�31cities�in�our�analysis�are�“emerging”�in�that�they�are�lesserknown�alternatives�to�the�more�established�or�recognized�cities�for�IT-BPO�operations�in�the�three�regions• South�and�North�America�(AMERICAS)• Asia,�India,�Japan�and�Australia�(ASPAC)• Europe,�Middle�East�and�Africa�(EMA)
To�some�degree,�all�of�the�cities�in�this�report�have�been�“discovered”by�some�companies,�yet�there�is�a�value�proposition�for�new�entrants.
Advantages offered by the Emerging Cities
The�advantages�offered�by�the�31�cities�vary�considerably,�even�assome�common�themes�pan�out.
Lower costs
Almost�assumed�in�any�IT-BPO�location�selection,�each�of�the�31�citiesoffer�a�relative�cost�advantage�to�major�outsourcing�markets,�but�thesize�of�the�arbitrage�varies�greatly.�Typically,�the�cities�in�developingcountries�such�as�Vietnam,�Chile�or�Romania�offer�a�larger�costadvantage.�The�cities�in�the�United�States�of�America�(US),�Canada�orAustralia�are�comparatively�more�expensive,�but�still�have�a�relative�costdifferential�with�the�larger�cities�in�their�countries.
Size of workforce
The�population�varies�significantly�–�with�Port�Louis�(Mauritius)�beingthe�smallest�among�the�31�cities�(population�of�130,0501)�and�Cairo(Egypt)�being�the�largest�(18�million�in�the�metropolitan�area2).However,�the�size�of�the�workforce�available�to�the�IT-BPO�industrydepends�on�a�variety�of�factors�–�such�as:�• The�proportion�of�graduates,�Cluj-Napoca�(Romania)�is�a�student�town
with�a�large�number�of�computer�graduates3
• Competition�available�from�other�/�competing�industries�-�the�callcenter�industry�faces�competition�from�the�tourism�industry�in�somecities
• In-migration�-�Calgary�receives�large�in-migration�from�other�cities�inCanada4.
We�have�highlighted�the�opportunities�as�well�as�constraints�of�variouscities�in�the�individual�profiles�contained�in�this�paper.
Quality of talent
The�quality�and�nature�of�the�talent�pool�varies�across�different�cities.Gdansk�(Poland),�for�instance�has�a�large�number�of�research�anddevelopment�institutions.�The�universities�in�Campinas�(Brazil)�areknown�hubs�for�innovation,�producing�a�large�number�of�patents5.Ahmedabad�(India)�produces�a�large�number�of�accounting�graduates.The�talent�pool�in�Cairo�has�an�inherent�service�orientation,�on�accountof�the�booming�and�long-standing�tourism�industry�in�Egypt.�
Linguistic and cultural similarities
Typically,�the�near-shore�emerging�cities�have�strong�linguisticsimilarities�and�cultural�compatibility�with�the�nearby�markets.�TheCentral�and�East�European�cities�are�to�West�Europe,�as�the�LatinExec
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1 Mauritius Government, Central Statistics Office estimates, 20072 Government of Egypt, Census estimates, 20063 Cluj Property and Investment, 20084 Statistics Canada, Census estimates, 20065 Rosana Ceron Di Giorgio, From University to Industry: Technology Transfer at Unicamp in Brazil, IP Handbook of Best Practices, 2007
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
American�cities�are�to�North�America.�However,�there�are�someinteresting�anomalies.�Buenos�Aires�(Argentina)�can�tap�both�NorthAmerican�and�European�business�due�to�linguistic�similarities�with�bothregions�(Spanish,�Portuguese�and�English).�Similarly,�accent�similaritieswith�the�US�mean�that�cities�in�the�Philippines�are�well�suited�to�servethe�US�market.
Dedicated infrastructure for IT-BPO companies
Dedicated�buildings�or�complexes�for�IT-BPO�companies�complete�withbasic�infrastructure�and�facilities�such�as�power�and�telecommunicationare�available�or�being�constructed,�in�most�of�the�31�cities.�Some�citieshave�gone�a�step�further�and�set�up�areas�for�promoting�specializedservices�–�for�instance,�the�Gujarat�International�Finance�Tech-City6 inAhmedabad�(India)�and�the�Tunis�Financial�Harbor7 in�Tunis�(Tunisia)�are�tobe�dedicated�for�financial�services.�Changsha�(China)�has�a�“CartoonCity”�to�house�animation�companies8.�
Quality of Life
This�parameter�varies�across�cities,�with�some�cities�such�as�Brisbane(Australia)�or�Curitiba�(Brazil)�globally�recognized�as�great�places�to�liveand�work.�In�some�of�the�other�cities,�there�are�issues�such�as�airpollution�or�traffic�congestion�during�peak�hours.�However,�the�overallbusiness�environment�may�not�necessarily�be�affected.�
Government Support and Incentives
The�governments�are�taking�active�interest�in�marketing�their�cities�to�IT-BPO�companies.�Competitive�monetary�and�non-monetary�incentivessuch�as�quicker�clearances,�facilitation�with�real�estate�and�recruitmentare�some�incentives�on�offer.�For�instance,�in�Guadalajara�(Mexico),�thetime�taken�to�set�up�business�has�gone�down�considerably�in�recentyears.�Port�Louis�(Mauritius)�provides�easy�work�permits�to�encourageexpatriates�to�work�in�the�otherwise�small�country.�Other�efforts�includeencouraging�technical�education�(such�as�in�Santiago,�Chile9)�or�the�studyof�languages�(such�as�English�in�the�Chinese�cities)�to�better�prepare�thetalent�pool.
6 http://giftgujarat.in, GIFT website, December 20087 http://www.gfh.com/en/our-business/tunis-financial-harbour.html, Gulf Finance House website, December 20088 http://www.greatdreams.com.cn/english/body.asp?NewsID=476, Great Dreams website, December 20089 Ministry of Education, Higher Education in Chile: Aiming for Quality, March 2005
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
North and South America (AMERICAS)
The�near-shore�advantage,�linguistic�and�cultural�affinity�-�with�the�key�markets�of�NorthAmerica�are�the�top�drivers�for�cities�within�the�Americas�region.�The�Latin�Americancountries�are�leveraging�the�language�advantage�to�provide�call�center�and�back-officeservices�to�North�American�companies.�The�cities�in�the�US�and�Canada�are�emerging�asonshore�alternatives�for�North�American�companies�and�are�typically�tapped�for�higher-valueadding�services.�By�and�large,�infrastructure�is�well�developed�in�the�Americas�cities�and�thequality�of�life�is�good.�The�high-tech�or�Information�and�Communications�Technology�(ICT)sector�is�accorded�priority�by�the�local�governments�in�most�cities.
Asia, India, Japan and Australia (ASPAC)
Most�of�the�10�emerging�cities�in�the�Asia-Pacific�are�tier�II�or�III�cities*�in�the�“veteran”supplier�countries�of�India,�China,�Malaysia�and�the�Philippines.�The�one�exception�is�Ho�ChiMinh�City�in�Vietnam.�The�city�is�an�important�economic�center,�and�looks�better�poised�toleverage�the�outsourcing�opportunity,�which�Vietnam�has�so�far�struggled�to�leverage.�TheAsia�Pacific�cities�by�and�large�offer�lower�costs,�good�talent�pools�with�lower�attrition,�andbetter�quality�of�life�than�the�tier�I�cities.�Typically�able�to�provide�a�large�range�of�outsourcingservices�including�IT,�BPO�and�Knowledge�Process�Outsourcing�(KPO),�most�of�the�AsiaPacific�cities�are�also�able�to�offer�relative�scalability�in�operations.�Major�markets�serviced�arethe�US,�UK�and�Japan.
City** IT services Call centerBack-office
services
Research and
development
Engineering
services
Other services
Buenos�Aires � � � Creative�services
Campinas � �
Curitiba � �
Calgary � �
Winnipeg � � �
Santiago � � �
Guadalajara � �
Queretaro � �
Boise � �
Indianapolis �
City**IT
services
Call
center
Back-office
services
Research and
development
Engineering
services
Other services
Brisbane � � Analytics
Changsha � Animation�and�gaming
Hangzhou � �
Ahmedabad � �
Jaipur � � �
Nagpur � �
Penang � � �
Davao�City � �
Iloilo�City � � Animation�
Ho�Chi�Minh�City � � �
* For definition please refer “Glossary & Key Terms” section.
** The tables are based on KPMG analysis of the services offered by vendors and shared services already operating in the city. The analysis does not imply thatthese services will also be offered from the city going forward, but only that there is a greater probability of them being offered from the city in the near future.
Source: KPMG, Exploring Global Frontiers, February 2009
Source: KPMG, Exploring Global Frontiers, February 2009
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Europe, Middle East and Africa (EMA)
The�emerging�cities�in�the�EMA�region�are�gaining�prominence�due�to�the�growing�regionalmarket�in�Europe.�Linguistic,�geographic�and�cultural�affinity�with�Europe�are�the�key�drivershere.�A�majority�of�these�cities�identified�are�country�capitals�or�important�economic�centersin�the�country.�Even�though�some�of�the�economies�are�going�through�political�instability,high�economic�growth�and�improvement�in�the�business�climate�in�the�last�few�years�isseeing�foreign�investment�pour�in�rapidly.�The�EMA�cities�are�capable�of�offering�a�range�ofservices�in�IT�and�BPO,�and�research�and�development.
Location Selection of Emerging Cities
Although�the�31�cities�in�this�study�comprise�attractive�investment�locations,�their�“emerging”status�in�itself,�implies�a�certain�degree�of�risk�for�potential�investors.�For�instance,�the�city’sinfrastructure�may�be�less�developed,�or�businesses�may�be�subjected�to�a�degree�of�politicaluncertainty.�Companies�must�decide�how�much�of�this�risk�they�are�willing�to�accept�in�returnfor�access�to�workforce�and�other�advantages.
Secondly,�the�choice�of�cities�in�this�study�is�not�intended�to�be�comprehensive.�The�cities�inthis�study�represent�attractive�alternatives,�but�there�are�undoubtedly�many�other�cities�thatmay�also�offer�similar�advantages�to�IT-BPO�investors.�This�also�includes�the�“establisheddestinations”,�and�companies�should�definitely�consider�the�trade�offs�and�relative�benefits�ofinvesting�in�one�of�the�“established”�locations�relative�to�the�“emerging”,�such�as�thoseprofiled�in�this�study.
Ultimately,�there�is�no�“one-size-fits-all”�solution,�and�the�choice�of�location�should�reflect�thespecific�requirements�of�each�company,�and�be�based�on�a�process�that�is�adequately�robustand�systematic�to�reflect�the�importance�of�the�location�decision.
City** IT services Call centerBack-office
services
Research and
development
Engineering
services
Other services
Sofia � � �
Zagreb � �
Cairo � �
Port�Louis � � Disaster�recovery
Belfast � � �
Gdansk � Data�management
Cluj-Napoca � � Research
Rostov-on-Don �
Belgrade � �
Tunis � � �
Lviv � � �
** The tables are based on KPMG analysis of the services offered by vendors and shared services already operating in the city. The analysis does not imply thatthese services will also be offered from the city going forward, but only that there is a greater probability of them being offered from the city in the near future.
Source: KPMG, Exploring Global Frontiers, February 2009
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Americas
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
AM
ERIC
AS
The�US�represents�the�majority�of�outsourcing�demand�from�the�Americasregion.�The�early�technology�hubs�in�the�US�(Silicon�Valley�and�Seattle)�–that�developed�in�response�to�early�services�sourcing�demand�are�now“established”�and�smaller�cities�in�the�US�have�started�to�emerge�asonshore�alternatives.�Several�cities�in�Canada�are�also�being�explored�dueto�the�time-zone�and�geographical�proximity.�Locations�in�the�US�andCanada�typically�offer�greater�service�maturity,�but�relatively�lower�costarbitrage�opportunities.
Other�locations�in�the�Americas�region�have�developed�as�“nearshore”outsourcing�alternatives.�While�these�can�be�regarded�as�“offshore”,�theyare�closer�to�the�buyers�in�the�US�than�locations�in�Asia.�In�countries�suchas�Mexico�and�Brazil,�the�first�wave�of�sourcing�led�to�some�citiesbecoming�“established”,�and�Tier�II�or�III�cities�are�now�being�explored.�Incountries�such�as�Argentina�or�Chile,�outsourcing�activity�is�still�limited�toTier�I�cities.
Most�supplier�countries�in�the�Americas�are�able�to�offer�a�large,�educatedlabor�pool�for�the�sourcing�industry,�and�are�capable�of�providing�morescalability�than�European�cities.�Further,�most�locations�are�typically�able�tooffer�a�range�of�services�in�the�IT,�BPO�as�well�as�the�KPO�space.�
The�South�American�locations�additionally�offer�multiple�language�skills.Cities�in�Mexico,�Argentina�or�Chile�are�capitalizing�on�their�sizeablebilingual�workforce�to�offer�outsourced�services�to�buyers.�Spanish-basedservices�are�offered�from�Mexico�and�Chile,�and�Portuguese-based�servicesare�offered�from�Brazil�and�Argentina.�The�governments�in�these�countriesare�also�aggressively�promoting�and�incubating�the�local�services�industry,and�gearing�them�up�for�larger�exports.
As�for�other�regions�covered�in�this�report,�the�cities�profiled�for�theAmericas�region�are�not�intended�to�provide�a�comprehensive�list,�however,should�offer�a�representative�sample�of�the�options�available�in�the�region.Numerous�other�locations�could�also�have�been�included�and�the�selectionof�cities�is�intended�to�provide�a�flavour�of�the�options�available�when�onedecides�to�look�“beyond�the�frontier”.
9
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Buenos Aires 13
Calgary 23Winnipeg 25
Santiago 29
Guadalajara 33Queretaro 35
Boise 39Indianapolis 41
Campinas 17Curitiba 19
AMERICAS - Table of Contents
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Argentina
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure2
The�Argentinean�government�is�based�upon�a�Republican,�Representative�and�Federalsystem.�The�President�is�elected�for�a�four�year�term�by�means�of�a�direct�popular�vote,�andmay�be�re-elected�for�a�single�consecutive�term.�The�House�of�Representatives�is�staffed�by2�houses�and�257�members�elected�for�a�4�year�term�through�a�direct�vote.�The�country�isadministratively�divided�into�the�Federal�Capital�(the�city�of�Buenos�Aires)�and�23�provinces.Each�province�has�its�own�governor,�legislature�and�judiciary.�
Business and Investment ClimateForeign Direct Investment (FDI): Argentina�received�USD�5.7�billion�in�FDI�in�2007,�upfrom�USD�5�billion�in�20061.�
GDP growth: Real�GDP�growth�in�Argentina�averaged�8.8�percent1.�EIU�expects�the�GDPgrowth�to�slow�down�to�2.2�percent�in�2009�due�to�the�global�slowdown.
Inflation: The�12-month�Consumer�Price�Inflation�(CPI)�was�9.1�percent�in�July1.�EIUbelieves�that�inflation�may�reduce�slightly�in�2009,�to�9.4�percent�at�year-end,�owing�toslower�domestic�demand�growth�and�falling�import�prices.�
IT-BPO Scenario in the country3
Argentina’s�IT-BPO�services�exports�were�USD�300�million�in�FY�2007.�There�were�around1000�companies�in�the�IT-BPO�sector�employing�approximately�40,000�qualified�workers.�Bythe�end�of�2011,�the�industry�is�expected�to�employ�70,000�workers�and�to�raise�its�exportsto�more�than�USD�600�million.�
The�Software�&�IT�Services�Chamber�of�Commerce�from�Argentina�(CESSI�ArgenTIna)represents�companies�that�develop,�produce,�market�and�implement�software�and�providerelated�services�in�Argentina.�The�major�players�in�the�country�are�US�firms,�which�includeComputer�Associates,�IBM,�Microsoft,�and�Oracle.�The�country�has�several�small�localcompanies.
Buenos�Aires�is�emerging�as�a�destination�for�software�services�in�the�country.�In�1998,Buenos�Aires�was�considered�Latin�America's�incubator�for�start-up�Internet�companies.The�boom�in�Argentina�started�with�El�Sitio�and�Patagon,�both�Argentina-based�companiesthat�listed�on�the�NASDAQ�stock�exchange�in�the�US.�The�IT-BPO�industry�experienced�aslowdown�during�the�downturn�in�2001�and�an�economic�crisis�in�Argentina�the�followingyear.�However,�the�IT-BPO�industry�is�reviving�in�the�last�few�years,�which�has�also�seenhigh�GDP�growth.
Government incentives3
Software�production�was�recognized�as�an�industrial�activity�as�per�Law�25,856�and�Law25,922,�and�software�companies�can�avail�incentives�such�as:
•�Tax�exemption�of�60�percent�of�the�total�amount�of�the�income�tax
•�Fiscal�stability�for�ten�years�as�from�the�passing�of�Law�25,922�in�2004
•�Reduction�of�employer�contributions�up�to�70�percent
•�Lack�of�restrictions�to�foreign�currency�wire�transfers�for�imports�of�goods�or�services
•�Other�benefits�derived�from�the�recognition�of�software�as�an�industrial�activity.
Argentina
Size of the country 2,737,000 sq. kms.
Population 40.6 million (2008)
CapitalAutonomous City ofBuenos Aires
Currency Argentine Peso (ARS)
1 USD = ARS (average) 3.08 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 523.6 billion (2007 est.)
• GDP per capita in PPP: USD 14,268 (2007 est.)
• CPI: 9.3 percent (2007 est.)
• Unemployment rate:8.2 percent (2007 est.)
• FDI stock per capita: USD 1,764 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating B/ Negative
Standard & Poor’s ForeignCurrency Risk Rating
B- / Stable / C
Ease of Doing Business Rank(2009)
113
Rigidity of Employment Index(2009)
35
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008 2 www.argentina.ar; Invest Argentina website, December 20083 www.cessi.org.ar/main_en.htm, CESSI Argentina website, 2007
Sources: www.eiu.com, www.cia.gov, www.gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Buenos Aires
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Buenos�Aires
Quick facts
GeographicLocation
Buenos Aires can be reached in about 11 hours by air fromNew York, Paris or Madrid
Time Zone GMT -0300
ClimatePleasant climate with four seasons – spring, summer, falland winter. The average temperature is 18 degrees Celsiusand average annual rainfall is 114 cm
Population1 12,600,000
Literacy rate2 96 percent
Languages Spanish, English, Portuguese
Major industriesFood processing, tourism metal works, automobile, textiles,chemicals
1 WorldAtlas.com, List of biggest cities in the world, December 20082 New York Times, Peso's Devaluation Gives Argentina Cost Advantages, October 20023 www.cessi.org.ar/main_en.htm, CESSI Argentina website, 20074 ProsperAr, Software & IT Services in Argentina, 2008
Sources: 1 Indec National Ministry of Economy (2007) 2 Buenos Aires Herald (2007)
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Buenos Aires has a large talent pool and a number of reputededucational institutions, capable of supplying workforce to the IT-BPO industry
• Argentina’s cultural closeness and linguistic similarity with Europeis an advantage, as it allows the country to additionally tapbusiness from markets in Europe
• Spanish is the official language, but Portuguese and English arealso spoken in the city, which can be used to provide multi-lingualservices
• The city can serve US markets effectively as Argentina lies in thesame time-zone as the East US
• The IT-BPO industry (high-tech sector in general) is growing rapidlyand has been prioritized and encouraged through incentives by thegovernment
• The country’s cost competitiveness increased significantly after thedevaluation of its currency Peso in 2002, which brought downprices to below half their 1990s’ levels2.
City Introduction
•�Buenos�Aires�is�the�capital�of�Argentina�and�also�the�country’s�financial�andcommercial�center
•�Buenos�Aires�is�among�the�most�populous�cities�in�the�world1.
Key IT-BPO companies (Services offered)
IBM (IT services)Tata ConsultancyServices (IT services)
Hewlett Packard (ITservices)
Latin3 (Creativeservices)
TeleTech (Call center) Sabre (IT services)
Sources: Company websites of IBM, HP, TCS, Teletech, Reuters
Current IT-BPO scenario in the city Development of the current IT-BPO industry3
•�The�growth�of�Argentina’s�IT-BPO�industry�during�the�technology�slowdown�wasadversely�affected�by�the�economic�crisis�of�2001-02
•�However,�in�the�last�few�years,�a�large�number�of�multinational�companies�have�set�upoperations�in�Buenos�Aires,�including�Microsoft,�Intel�and�Motorola
•�The�IT-BPO�industry�has�been�growing�rapidly�since�then,�making�it�one�of�the�fastestgrowing�sectors�in�the�economy.
Industry Profile – Size and Specifics
•�The�total�export�of�IT-BPO�services�from�the�city�in�2007�is�estimated�at�USD�228million3
•�Buenos�Aires�has�about�49�percent�of�the�more�than�1000�registered�IT-BPOcompanies�in�Argentina4�
•�The�prominent�services�sourced�from�Buenos�Aires�include�software�development,�callcenters,�back-office�operations�such�as�data�processing,�and�creative�services�such�asdesign�and�media�services.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 ProsperAr, Software & IT Services in Argentina, 2008
2 US Equities, Report on Buenos Aires, Second quarter 2007
3 www.new-taurus-website.com/DeerfieldBeachfirmplanningBuenosAiresTechnologyPark.HTM,February 2007
4 www.buenosaires.gov.ar/areas/produccion/distrito_tecno/ingles/michetti.php, December 2008
5 www.invertir.gov.ar/frontend/contenido/subpagina.php?subpaginaId=58, December 2008
6 Mercer, Annual Cost of Living Index, 2008-09
7 OSAC, Argentina Crime & Safety Report, 2007
8 World Bank - Hazard & Risk Management in Argentina, November 2006
9 OSAC, Buenos Aires Country Council Report, 2007
* For definition please refer “Glossary & Key Terms” section.
Human Resources
•�Buenos�Aires�has�good�educational�institutions�including�Argentina’s�biggest�university,�the�University�of�Buenos�Aires,�which�enrollsclose�to�50,000�students�every�year1.�The�city�produces�a�large�pool�of�technical,�IT�and�engineering�graduates
•�The�brain�drain�following�the�country’s�economic�crisis�is�seeing�some�reversal�with�growth�settling�in,�and�this�could�be�a�potentialsource�of�talent�for�the�IT-BPO�industry�in�the�city
•�English�language�skills�of�the�population�are�becoming�stronger,�as�education�in�English�is�being�encouraged.�A�large�number�of�privatecourses�in�English�are�also�available
•�The�city�has�lower�attrition�rates�and�employee�turnover�compared�to�many�other�emerging�IT-BPO�destinations.
Infrastructure
•�Office space (IT Parks): Buenos�Aires�is�expected�to�have�additional�Class�A*�office�space�of�70,000�sq.�mts.�in�2008.�However,vacancy�rates�are�on�the�decline�on�account�of�high�demand,�leading�to�rising�sale�and�lease�rates2
•�Power supply: Power�tariffs�are�significantly�lower�than�those�in�the�US.�However,�some�scheduled�and�unscheduled�outages�arewitnessed
•�Telecom Infrastructure: Argentina�has�expanded�and�modernized�its�local�telecommunications�networks,�with�over�15�million�new�linesduring�the�last�decade,�leading�to�improved�connectivity1
•�National and International connectivity: Buenos�Aires�is�well�connected�with�cities�in�Argentina�by�road�and�rail.�It�has�three�airports,with�two�of�them�serving�cities�in�Argentina�and�neighboring�countries.�The�Ezeiza�International�Airport�connects�Buenos�Aires�todestinations�in�the�US�and�Europe
•�Upcoming projects: Taurus�Investment�Holdings�has�planned�a�technology�park�near�Buenos�Aires�which�is�expected�to�add�more�than2787�sq.�mts.�of�office�space3.�A�“Technology�District”�is�also�being�planned�by�the�government�in�the�Parque�de�los�Patricios�area�ofthe�city4.
State / city specific incentives for IT-BPO over and above country level incentives, if any5
•�The�Software�Law�establishes�that�software�production�is�to�be�considered�as�a�productive�transformation�activity�and�accorded�thesame�priority�and�incentives�as�other�industrial�activities.�Some�of�these�incentives�include:�
-�Lower�turnover�tax�rates�and�exemption�from�provincial�taxes
-�Benefits�in�municipal�fees
-�Access�to�financing�with�preferential�terms
-�Discounts�on�services�such�as�electricity,�gas,�water�and�communications.
Quality of life
•�Cost of living: The�cost�of�living�in�Buenos�Aires�is�one�of�the�lowest�among�global�cities.�The�annual�Cost�of�Living�Index�(2008)�byMercer�ranks�Buenos�Aires�138�among�143�countries6
•�Crime rate: The�crime�rate�in�Buenos�Aires�is�quite�high,�with�crimes�against�property,�burglary�and�kidnapping�common.�Estimatesindicate�that�close�to�200,000�unregistered�firearms�exist�in�the�city7�
•�Pollution levels: Air�pollution�levels�in�Buenos�Aires�are�quite�high,�especially�in�densely�populated�areas�and�during�peak�businesshours
•�Ease of commuting: Traffic�is�typically�heavy,�but�fast�moving.�The�public�transport�system�in�Buenos�Aires�offers�multiple�optionsincluding�a�subway�network,�more�than�100�bus�lines�and�a�taxi�fleet,�available�throughout�the�day
•�Availability of Hotels: Buenos�Aires�has�a�range�of�international,�luxury�and�budget�hotels�that�cater�to�the�tourism�industry.�The�hotelindustry�has�seen�capacity�creation�over�the�last�few�years,�with�older�hotels�being�renovated�to�cater�to�the�growing�demand�frombusiness�and�tourist�travelers.
Risk: City specific
•�Catastrophic risks: The�city�is�prone�to�flooding�during�heavy�rains8.�Buenos�Aires�lies�in�seismic�zone�with�low�earthquake�risk
•�Political risks: The�city�has�low�political�risk.�The�risk�of�a�military�coup�in�Argentina�has�also�gone�down�over�the�years
•�History of disruptions: There�have�been�no�major�disruptions�since�the�economic�crisis�in�2001.�However,�demonstrations�for�domestic,economic�and�political�issues�are�common�in�Buenos�Aires9.�
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Brazil
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
The�Federative�Republic�of�Brazil�is�a�Presidential�democracy.�The�President�is�elected�for�aperiod�of�four�years�and�acts�as�the�Head�of�State�as�well�as�the�Head�of�the�FederalGovernment.�There�are�26�autonomous�states�and�1�federal�district,�each�with�their�ownlegislature.�Individual�states�seek�to�attract�investments�by�offering�ad�hoc�tax�benefits�andinfrastructure�support�to�specific�companies,�negotiated�on�a�case�by�case�basis,�leading�tovarying�investment�climates�in�different�states.
Business and Investment ClimateForeign Direct Investment (FDI): Brazil�received�USD�34.6�billion�of�FDI�in�2007,�slightlylower�than�the�Central�Bank’s�projection�of�USD�35�billion,�although�up�significantly�fromUSD�18.8�billion�in�20062.
GDP growth: The�Brazilian�economy�is�forecast�to�grow�by�an�annual�average�of�4.1�percentin�2008-11,�which�is�lower�than�the�4.5�percent�rate�registered�in�the�past�4�years,�butaround�double�its�long-term�average�(1981-2007)�of�2.2�percent1.
Inflation: EIU�projects�year-end�inflation�in�2008�at�6.8�percent,�and�year-end�inflation�todecline�to�4.6�percent�in�2009.
IT-BPO Scenario in the countryBrazil,�a�part�of�the�Brazil,�Russia,�India�and�China�(BRIC)�nations,�has�been�emerging�as�akey�IT-BPO�destination�with�exports�of�USD�800�million�in�2007�employing�more�than�1.7million�people3.�
Global�companies�like�Accenture,�ATOS�Origin,�BT,�EDS,�HSBC,�IBM,�Intel,�Microsoft,�Sun,TCS,�Unisys,�have�set-up�centers�in�the�country.
The�Brazilian�association�of�information�technology�and�communication�companies(BRASSCOM)�is�the�central�association�for�the�IT-BPO�industry�in�Brazil.�Some�emergingcities�within�Brazil�are�Curitiba,�Campinas,�Sao�Luis,�Teresina,�Fortaleza,�Natal,�Canoas,Caxias�do�Sul,�apart�from�more�established�destinations�like�Sao�Paulo,�Rio�de�Janeiro�andRecife.
Government Incentives3
BRASSCOM�expects�Brazil's�IT�services�exports�to�reach�USD�5�billion�and�develop100,000�new�IT�professionals�by�2011,�with�the�support�of�federal�and�local�governments,by�providing�incentives�for�development.�
The�Productive�Development�Policy�by�the�government�announced�a�reduction�of�50percent�on�the�payroll�Social�Security�tax�paid�by�IT-BPO�companies.�Besides,�federalincentives�allow�for�a�reduction�on�labor�charges�and�income�taxes�for�education,�innovationand�research�and�development.
Brazil
Size of the country 8,547,403 sq. kms.
Population 183.9 million (2008)
Capital Brasilia
Currency Brazil Real (BRL)
1 USD = BRL (average) 1.84 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 1,836 billion (2007 est.)
• GDP per capita in PPP: USD 9,690 (2007 est.)
• CPI: 4.5 percent (2007 est.)
• Unemployment rate: 9.3 percent (2007 est.)
• FDI stock per capita: USD 1,315 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BBB- / Stable / A-3
Ease of Doing Business Rank(2009)
125
Rigidity of Employment Index(2009)
46
Country Snapshot
1 www.eiu.com, various pages, December 2008; 2 Brazzil Magazine, Foreign Direct Investment in Brazil Doubles in 2007 to US$ 35 Billion, 28th January 20083 http://www.brasscom.org.br, various pages, December 2008
Sources: www.eiu.com, www.cia.gov, www.gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Recife
Rio de Janeiro Campinas
Sao PauloCuritiba
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Campinas
Quick facts
GeographicLocation
Situated in south-east Brazil, Campinas can be reachedfrom Brasilia in about an hour and 30 minutes by air
Time Zone GMT -0200
Climate
Mild climate, with mostly sunny days and two majorseasons – summer and winter. The average temperature is22.4 degrees Celsius and average annual rainfall is 138.2cm
Population1 1,100,000
Literacy rate2 95 percent
Languages Portuguese, English, Spanish
Major industriesAutomotive, electronics, telecom equipment, petroleumrefining, food processing, pharmaceuticals
1 Rosana Ceron Di Giorgio, From University to Industry: Technology Transfer at Unicamp inBrazil, IP Handbook of Best Practices, 2007
2 NaiGlobal, Global Market Report (Campinas), 2008
3 www.inova.unicamp.br, University of Campinas website, various pages, December 2008
4 www.actminds.com, ActMinds website, various pages, December 2008
Source: 1 Campinas Government (2007)
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Campinas has a number of educational institutions capable ofsupplying a talent pool, especially qualified in engineering andtechnology sectors
• The city is a hub for R&D activities. The University of Campinas hasproduced the largest number of patents in Brazil1
• The talent pool available in the city is well suited for providing ITservices such as application development and maintenance,support and hosting
• There is adequate IT-BPO infrastructure due to the presence oftechnology parks, reliable power and telecom
• The city offers a good quality of life and is looked at as a lesscongested alternative to Sao Paulo city
• The city can serve US markets effectively as it lies in a similartime-zone as Eastern US
• A number of IT-BPO companies setting up centers in Campinas arealso looking to exploit opportunities in the large domestic marketfor IT services in Brazil.
City Introduction
•�Campinas�is�one�of�the�major�cities�in�the�state�of�Sao�Paulo
•�It�is�an�important�economic,�transportation�and�telecommunications�hub.
Key IT-BPO companies (Services offered)
IBM (IT services) Nortel (R&D center)
Net.2Net (IT services) Ci & T (IT services)
ACS (Call center services) Softway (IT services)
Sources: Company websites of IBM, Softway, University ofCampinas website
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�The�region�around�Campinas�is�known�as�the�Brazilian�“Silicon�Valley”�due�to�thepresence�of�a�large�number�of�research�centers,�universities,�high-tech�industries�andmultinational�companies2
•�IBM�was�one�of�the�earliest�companies�to�set�up�operations�in�the�city3.�The�Tech�Townwas�built�in�the�area�surrounding�the�IBM�office�in�Campinas3
•�ActMinds,�a�joint�venture�of�10�IT�companies�in�the�city�reports�USD�10.5�million�inservice�exports�in�20074.
Industry Profile – Size and Specifics
•�The�prominent�services�sourced�from�Campinas�include�hosting,�application�supportand�development�and�customization.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 Topuniversities.com website, December 2008
2 Rosana Ceron Di Giorgio, From University to Industry: Technology Transfer at Unicamp inBrazil, IP Handbook of Best Practices, 2007
3 NaiGlobal, Global Market Report (Campinas), 2008
4 www.technopark.com.br/ingles/tech-e.html, December 2008
5 www.inova.unicamp.br, University of Campinas website, December 2008
Human Resources
•�Campinas�has�a�large�number�of�educational�institutions�as�well�as�technical�schools,�including�the�University�of�Campinas�(Unicamp)offering�courses�in�engineering�and�technology.�The�Unicamp�produces�1,935�graduate�and�post-graduate�students�every�year1 and�isalso�ranked�as�the�institution�producing�the�highest�number�of�patents�in�Brazil2
•�English�language�skills�are�limited,�but�education�and�training�in�English�is�being�encouraged.�Spanish�is�also�taught�as�a�secondlanguage
•�The�city�has�lower�attrition�rates�compared�with�larger�cities�in�Brazil,�especially�Sao�Paulo.
Infrastructure
•�Office space (IT Parks): Due�to�high�overall�demands,�vacancy�rates�are�very�low.�Campinas�has�a�relatively�smaller�amount�ofconventional�office�space,�but�claims�to�have�the�largest�number�of�business�incubators�and�industrial�parks�where�most�companiesare�located3
•�Power supply: There�is�typically�no�major�power�supply�interruption�in�the�city.�Limited�and�non-scheduled�interruption�may�occur�dueto�storms�and�lightning,�mostly�in�summer
•�Telecom Infrastructure: Fiber�optic�network�for�voice,�image�and�data�communication�is�available�in�Campinas,�provided�by�Telefonicaor�Embratel4.�Telecom�facilities�are�provided�as�a�shared�service�in�most�industrial�parks
•�National and International connectivity: Campinas�is�linked�to�other�towns�and�cities�in�Sao�Paulo�state�via�highways.�The�ViracoposInternational�Airport�caters�to�domestic�and�international�passenger�and�cargo�flights
•�Upcoming projects: A�Scientific�and�Technological�Park�has�been�planned�in�Campinas,�and�is�intended�to�be�a�hub�for�R&D�activitiesand�also�offer�incubation�facilities�for�technology�companies5.
State/ city specific incentives for IT-BPO over and above country level incentives, if any6
•�Reduction�in�the�tax�rate�on�services�to�two�percent
•�Reduction�in�the�amount�of�Annual�Real�Estate�tax�from�30�to�50�percent
•�Exemption�from�fees�and�emoluments.
Quality of life
•�Cost of living: The�cost�of�living�in�Campinas�is�slightly�lower�than�that�in�Sao�Paulo�city�in�terms�of�housing,�transport�and�food
•�Crime rate: Violence�and�crime�rates�are�high�in�Campinas�and�include�robbery,�kidnapping�and�cargo�theft.�The�Campinas�governmenthas�partnered�in�2006�with�Bosch�and�has�put�in�place�a�security�system�with�around�270�close�circuit�cameras�to�keep�the�crime�ratein�check7
•�Pollution levels: The�elevated�topography�of�Campinas�and�cool�winds�throughout�the�year�help�keep�the�air�clear�of�pollutants.�Airpollution�levels�in�the�city�are�low
• Ease of commuting: Traffic�jams�are�common�during�peak�hours�in�some�parts�of�the�city
•�Availability of Hotels: Campinas�has�1�five-star�hotel�and�several�other�four-star�hotels�in�the�city,�with�a�total�of�about�3,900�rooms8.
Risk: City specific
•�Catastrophic risks: Some�parts�of�the�city�are�prone�to�floods,�especially�in�the�summer9
•�Political risks: The�political�situation�in�the�state�and�city�is�stable,�without�any�major�events�over�the�past�three�years.�The�mayor�wasre-elected�for�the�second�four-year�term�in�20086
•�History of disruptions: The�state�of�Sao�Paulo�witnessed�criminal�attacks�against�the�police�and�some�civilians�in�May�2006,�which�ledto�several�casualties10.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Curitiba
Quick facts
GeographicLocation
Situated in southern Brazil, Curitiba can be reached by airfrom Brasilia in about an hour and 30 minutes
Time Zone GMT -0300
Climate
Temperate climate characterized by four distinct seasons –spring, summer, autumn and winter. The averagetemperature in summer is 21 degrees Celsius and 12degrees in winter. The annual average rainfall is 150 cm
Population1 1,790,000
Literacy rate2 96.0 percent
Languages Portuguese, Spanish, English
Major industries Automotive, food processing, tourism, furniture
1 \ ICLEI, Orienting Urban Planning to Sustainability in Curitiba, Brazil, 2003
2 www.brasscom.org.br, Brasscom website, December 2007
3 Foreign Trade Secretariat, Trade balance, 2007
4 Ministry of Labor in Brazil, January 2008
Sources: 1 Brasscom Brazil, 20082 Liveable Megacities
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Curitiba produces a qualified technical talent pool of about 19,500every year for the IT-BPO industry2
• Measures to improve the English language skills of the workforceare being taken, potentially making the talent pool suited for bi-lingual services
• The city provides good infrastructure including a dedicatedtechnology park for IT-BPO companies, and reliable power andtelecom
• The city is known within Brazil as a “model city” and offers goodquality of life due to its effective public transport and floodmanagement system
• The city can serve US markets effectively as it lies in a similartime-zone as the East US.
City Introduction
•�Curitiba�is�the�capital�of�Parana�state,�and�an�important�cultural,�political�andeconomic�center
•�It�is�considered�to�be�the�ecological�capital�of�Brazil�as�it�has�the�largest�greenarea�per�inhabitant1.
Key IT-BPO companies (Services offered)
Wipro Technologies (BPOservices)
Accenture (IT and BPOservices)
HSBC Global Technologies(IT services)
Atos Origin (IT services)
Cinq Technologies (ITservices)
Exxon (Shared servicescenter)
Sources: Accenture website, BRASSCOM, Offshoring Times
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�IBM,�Dell,�HP�and�Xerox�were�the�first�few�companies�to�set�up�IT-BPO�operations�inCuritiba
•�Several�companies�such�as�ExxonMobil,�Phillip�Morris,�Bristol�Meyers�Squibb,Accenture,�Sadia,�HSBC,�Damovo�do�Brasil,�Siemens�have�customer�service�centers�inCuritiba.
Industry Profile – Size and Specifics
•�The�combined�IT-BPO�exports�of�the�city�are�estimated�at�USD�202,5663
•�Curitiba�has�791�registered�players�and�281,025�people�employed�in�the�IT-BPO�sectorin�20084
•�Services�offered�from�Curitiba�include�IT�Infrastructure�outsourcing,�softwaredevelopment�outsourcing,�technical�support�outsourcing,�system�implementationadvisory,�R&D�services�and�enterprise�application�services
•�BPO�services�offered�from�the�city�include�finance�and�accounting,�order�management,customer�care�and�human�resources.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.brasscom.org.br, various pages, December 2008
2 Ministry of Labor in Brazil, January 2008
3 investimentos.desenvolvimento.gov.br, Brazil investment website, December 2008
4 ICLEI, Orienting Urban Planning to Sustainability in Curitiba, Brazil, 2003
5 ICLEI, Public Transport system in Curitiba, 2003
6 APFM, Flood Management in Curitiba Metropolitan area, January 2004
Human Resources
•�Curitiba�has�reputed�educational�institutions�such�as�Universidade�Tecnologica�Federal�do�Parana,�Universidade�Federal�do�Parana,Pontificia�Universidade�Catolica�do�Parana�with�61,084�students�enrolled�in�universities�every�year1�
•�The�demand�for�technical�talent�in�Curitiba�surpasses�the�current�supply,�however,�the�city�is�taking�several�initiatives�to�bridge�this�gap
•�Curitiba�is�also�taking�measures�to�augment�the�supply�of�English-speaking�labor.�The�city�currently�adds�about�19,500�engineers�andnon-technical�graduates�to�its�talent�pool�each�year2
•�Attrition�levels�in�the�industry�are�also�lower,�at�around�5�percent2.
Infrastructure
•�Office space (IT Parks): Curitiba�Tecnoparque�(Technopark)�covering�5�million�sq.�mts.�of�space�has�been�developed�to�attract�public�andprivate�technology�institutions,�technological-based,�R&D�companies,�as�well�as�universities1�
•�Power supply: Power�supply�is�reliable�except�for�rare�outages�during�heavy�rains�in�the�city.�The�state�of�Parana�is�an�important�powergenerating�center,�with�Itaipu�bi-national,�on�the�Parana�River�being�the�largest�hydroelectric�power�plant�in�Latin�America3
• Telecom Infrastructure: Curitiba�has�a�good�network�of�fiber�optic�infrastructure�for�reliable�telecom�services
•�National and International connectivity: Curitiba�is�well�connected�to�other�cities�in�Brazil�through�highways.�The�city�has�anInternational�Airport�(Afonso�Penna),�which�has�daily�flights�to�São�Paulo,�Rio�de�Janeiro�and�other�important�cities�in�Brazil.
State / city specific incentives for IT-BPO over and above country level incentives, if any3
•�The�state�of�Parana�offers�an�array�of�tax�incentives�and�benefits�to�assist�businesses,�particularly�small�and�micro�businesses,�anddomestic�and�foreign�companies�wishing�to�start�or�expand�operations,�including:
-�Exemption�in�the�collection�of�Value�Added�Tax�(VAT)�based�on�the�turnover�of�the�company
-�VAT�credits�for�export�oriented�companies.
Quality of life
•�Cost of living: Curitiba�is�one�of�the�state�capitals�within�Brazil�with�a�low�cost�of�living.�It�is�also�regarded�as�a�model�city�in�terms�ofurban�development�within�Brazil
•�Crime rate: Crime�rates�are�higher�in�some�parts�of�the�city�than�others
•�Pollution levels: There�is�no�problem�of�air�pollution�in�the�city.�Innovative�programs,�such�as�“All�Clean”�and�“Garbage�that�is�notGarbage”�have�been�introduced�to�keep�pollution�levels�low4
•�Ease of commuting: Public�transportation�in�Curitiba�is�well�planned,�with�an�extensive�system�of�buses�including�express,�inter-district,direct,�feeding�and�conventional�buses.�A�large�proportion�of�Curitiba�citizens�use�public�transport5
•�Availability of Hotels: Curitiba�has�several�luxury�hotels,�including�international�chains,�as�well�as�budget�hotels.�
Risk: City specific
•�Catastrophic risks: Flooding�was�a�serious�problem�faced�by�Curitiba.�However,�over�the�last�decade,�the�government�has�put�a�floodmanagement�program�in�place�with�funding�from�World�Bank6
•�Political risks: The�political�situation�is�stable,�and�there�have�been�no�significant�changes�in�legislation
•�History of disruptions: There�are�no�recent�instances�of�disruptions�in�the�city,�except�some�minor�incidents�of�rivalry�over�soccer.
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Canada
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Canada�is�a�constitutional�monarchy,�with�the�governor-general�(always�of�Canadiannationality�and�appointed�in�Ottawa)�acting�as�the�representative�of�the�British�crown.�Inpractice,�the�Canadian�House�of�Commons�is�sovereign.�Canada�is�a�federation�of�10provinces,�each�with�substantial�powers,�and�3�territories.�At�the�federal�level�are�theCommons,�the�main�seat�of�legislative�power,�and�the�non-elected�Senate,�which�plays�onlya�marginal�role.�Federal�and�provincial�governments�in�Canada�offer�a�wide�array�ofinvestment�incentives,�which�municipalities�are,�on�the�whole,�prohibited�from�doing.Provincial�incentives�tend�to�be�more�investor-specific�and�are�subjected�to�investments�inthe�granting�province.�
Business and Investment ClimateForeign Direct Investment (FDI): FDI�has�risen�by�73�percent�in�2007�to�USD�108.7�billion,over�20061.�EIU�expects�the�exceptionally�stable�operating�environment�to�make�Canada�anattractive�destination�for�investment.
GDP growth: The�Canadian�economy�has�posted�healthy�growth�at�an�annual�average�of�2.9percent�in�2006-07,�but�growth�slowed�sharply�in�the�fourth�quarter�of�2007�and�contractedin�the�first�quarter�of�20081.�EIU�expects�GDP�growth�at�an�average�of�around�1�percent�for2008�and�0.9�percent�in�20091.
Inflation: According�to�EIU,�the�average�annual�rate�of�inflation�is�forecast�at�3.0�percent�in2008.�The�rate�is�expected�to�slow�to�2.3�percent�in�2009�as�the�world�economy�slowsdown.
IT-BPO Scenario in the countryThe�geographic�proximity�to�the�United�States�is�helping�Canada�to�emerge�as�a�near-shoredestination�for�the�IT-BPO�industry.�The�IT-BPO�exports�of�Canada�were�USD�13.7�billion�in20073.�Currently,�the�IT-BPO�industry�employs�257,448�professionals4.�
The�Information�Technology�Association�of�Canada�(ITAC)�is�focusing�on�development�of�theIT-BPO�industry�in�Canada4.�The�Center�for�Outsourcing�Research�and�Education�(CORE)provides�education�and�information�about�outsourcing5.�
Companies�such�as�Cognos,�Crystal�Decisions,�Hummingbird,�Capgemini,�CGI�Group�and�X-Wave�have�set-up�base�in�Canada.�
Cities�like�Calgary,�Winnipeg�are�coming�up�in�the�IT-BPO�sector�alongside�few�otherestablished�locations�like�Vancouver,�Ottawa,�Toronto,�Montreal�and�Quebec�City.
Government incentives2
The�Canadian�government�offers�many�incentives�to�organizations�setting�up�IT-BPO�centersin�the�country,�including:
•�Lowest�payroll�taxes�among�G76 countries7
•�Tax�credits�for�expenditures�in�wages,�materials�and�equipment�for�organizations�involvedin�R&D
•�Ten�percent�tax�credit�to�organizations�hiring�apprentices�for�the�first�two�years4.
Canada
Size of the country 9,093,507 sq. kms.
Population 33.2 million (2008)
Capital Ottawa
Currency Canadian Dollar (CAD)
1 USD = CAD (average) 1.07 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 1,263 billion (2007 est.)1
• GDP per capita in PPP: USD 38,351 (2007 est.)1
• CPI: 2.2 percent (2007 est.)2
• Unemployment rate: 6.0 percent (2007 est.)1
• FDI stock per capita: USD 12,218 (2007 est.)1
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating AA / Stable
Standard & Poor’s ForeignCurrency Risk Rating
AAA / Stable / A-1+
Ease of Doing Business Rank(2009)
8
Rigidity of Employment Index(2009)
4
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008;
2 Bank of Canada estimates, 2007
3 Invest in Canada, 2007/08 edition
4 www.itac.ca, Information Technology Association of Canada, December 2008
5 www.core-outsourcing.org, CORE website, December 2008
6 G7 is the group of seven industrialized nations, United states of America, Canada, UnitedKingdom, France, Germany, Italy and Japan.
7 investincanada.gc.ca, Invest Canada website, December 2008
Sources: www.eiu.com, www.cia.gov, www.gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Vancouver
CalgaryWinnipeg
Ottawa
Toronto
22
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Calgary
Quick facts
GeographicLocation
Situated in Western Canada, by air, Calgary is about threeand half hours away from Toronto
Time Zone GMT - 0700
Climate
Mild climate with large variations in temperature and fourseasons – spring, summer, autumn and winter. The averagetemperature is maximum 10.3 and minimum -2.6 degreesCelsius. The average annual rainfall is 37.2 cm
Population1 1,230,000
Literacy rate2 99 percent
Languages English, French
Major industriesMining, oil and gas, manufacturing, technology, finance,aerospace, transportation, logistics
1 www.ccat.org, Calgary Advanced Technology website, December 20082 Alberata Economic Development, Calgary ICT profile, 20063 www.calgaryeconomicdevelopment.com, Calgary Economic Development website, December 2008
Sources: 1 Calgary Economic Development2 CIA 2007 (Literacy rate for Canada; literacy rates for individual cities were
not available)
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Calgary has several educational institutions providing qualifiedtalent for the IT-BPO industry
• Calgary has the highest rate of population migration into the cityamong Canadian cities, thereby providing a larger talent pool1
• English is the official language, but there is a sizeable Frenchspeaking population which is able to provide outsourced servicesin French
• The city offers good infrastructure including reliable power,telecom and transport facilities and a good quality of life to itsresidents
• The government in Calgary has been a key enabler for the IT-BPOindustry by providing tax breaks, incentives and substantialresearch funding
• The city’s established oil and gas industry is attracting outsourcingcompanies to leverage outsourcing opportunities in the oil and gassector
• Calgary’s proximity and cultural affinity with the US, coupled withits relative cost advantage allows it to tap the near-shoreoutsourcing market.
City Introduction
•�Calgary�is�a�major�urban�center�in�the�province�of�Alberta
•�The�city�is�Western�Canada’s�transportation�and�distribution�hub,�and�is�alsoCanada’s�energy�capital.�
Key IT-BPO companies (Services offered)
IBM (IT services)Fujitsu Consulting (ITservices)
SAP (IT services) TCS (IT services)
Hewlett Packard (ITservices)
JDA Software (Softwaredevelopment)
Sources: SAP company website; Calgary EconomicDevelopment website
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Over�the�last�10�years,�the�ICT�sector�has�become�a�major�contributor�to�the�strongeconomic�growth�in�Calgary
•�The�IT�industry�represents�over�half�of�the�ICT�companies�located�in�the�city.
Industry Profile – Size and Specifics
•�The�IT-BPO�export�of�Alberta�province�exceeded�USD�2.2�billion�in�20072
•�Calgary’s�IT�industry�employs�about�20,000�workers,�with�about�1,543�IT�companiesoperating�from�the�city3
•�Web�and�Internet�related�services,�software�development,�system�integration�andrelated�services�are�the�prominent�IT�services�sourced�from�Calgary
•�The�city�also�offers�back-office�services�such�as�finance�and�human�resourcesoutsourcing.
23
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.ccat.org, Calgary Advanced Technology website, December 2008
2 www.calgaryeconomicdevelopment.com, Calgary Economic Development website, December 2008
3 http://www.enmax.com/Corporation/Media+Room/Current+News+Releases/2006+News+Releases
/ENM AX+Begins+Construction+on+Taber+Wind+Farm.htm, ENMAX website, 18 May 2006
4 Calgary.ca, Invest in Calgary website, December 2008
5 www.alberta.ca/, Alberta State Government website, various pages, December 2008
6 Statistics Canada, Labour Force Survey for Calgary CMA, 2007
7 www.mapleleafacademy.com/calgary.htm, Maple Leaf Academy website, December 2008
8 aema.alberta.ca, Alberta Emergency Management website, December 2008
Human Resources
•�Calgary�has�a�young�and�educated�talent�pool,�with�more�than�10,000�people�graduating�per�year�from�post-secondary�institutions3.Prominent�educational�institutions�around�Calgary�include�the�University�of�Calgary,�SAIT�Polytechnic,�Alberta�College,�The�University�ofAthabasca�and�DeVry�Institute�of�Technology�
•�The�city�has�witnessed�highest�total�labor�force�growth�at�33.8�percent�over�the�past�10�years�(1998-2007)�due�to�in-migration1
•�Salary�rates�in�Calgary�are�lower�than�those�in�the�US�cities�mainly�due�to�publicly�funded�health�care.�Salaries�for�a�software�engineerare�moderately�lower�than�levels�in�Toronto1.
Infrastructure
•�Office space (IT Parks): Calgary�has�nearly�3,000,000�sq.�mts.�of�downtown�office�space;�with�low�vacancy�rates2.�A�significant�amount(around�90,000�sq.�mts.)�is�expected�to�be�added�by�20112
•�Power supply: Electricity�costs�in�Calgary�are�lower�compared�to�Toronto�and�cities�in�the�US2.�The�Calgary�government�has�signed�a�20-year�green�(wind)�electricity�supply�agreement�with�power�supplying�company,�ENMAX�for�purchasing�75�percent�of�its�requirements,securing�future�supply3
•�Telecom Infrastructure: Calgary�has�an�extensive�fiber�optic�infrastructure�along�with�sophisticated�voice�and�transfer�technology.�Thecity�is�well�served�by�high-speed�internet�service�providers
•�National and International connectivity: The�city�has�well�integrated�air,�rail�and�road�infrastructure�and�provides�access�to�Asia,Europe,�and�the�US.�Several�American�cities�can�be�reached�in�less�than�four�hours�by�air�from�Calgary
•�Upcoming projects: Long-term�real�estate�development�is�being�planned�in�Calgary.�Aurora�Business�Park,�a�1.1�million�sq.�mts.business�park�by�Corporate�Properties�and�Buildings�business�unit,�approved�in�2007,�is�likely�to�be�completed�in�20�to�25�years4.Another�park,�the�Lincoln�Business�Park�is�scheduled�to�be�completed�in�the�next�10�years4.
State / city specific incentives for IT-BPO over and above country level incentives, if any5
•�The�city�of�Calgary�derives�large�benefits�due�to�a�low�tax�regime.�The�province�of�Alberta�has�no�municipal�or�provincial�sales�tax.Alberta�also�has�one�of�the�lowest�provincial�corporate�tax�rates�in�Canada
•�Inventory�tax,�machinery�and�equipment�tax�and�payroll�tax�are�not�levied�in�the�province�of�Alberta
•�Alberta�is�subject�to�a�flat�income�tax�rate�of�10�percent,�while�all�other�Canadian�provinces�work�on�a�sliding�income�scale.�
Quality of life
•�Cost of living: Rapid�expansion�over�the�last�few�years�has�led�to�a�rise�in�the�cost�of�living�in�Calgary.�However,�the�cost�of�living�is�stillrelatively�low�compared�to�that�in�Toronto�and�Vancouver.�Calgary’s�good�quality�of�life�attracts�more�than�11,000�people�annually�fromother�provinces�(citing�records�from�1997�to�2006)6
•�Crime rate: Calgary�is�a�relatively�safe�city.�According�to�a�2008�survey�of�crime�in�100�Canadian�cities�by�Maclean's�Magazine,�Calgaryranks�33�in�the�country
• Pollution levels: Calgary�has�undertaken�numerous�initiatives�towards�reducing�corporate�greenhouse�gas�emissions.�Calgary�has�beenrated�as�the�cleanest�city�in�an�environmental�examination�of�215�global�cities7
•�Ease of commuting: Calgary�Transit,�the�public�transportation�company�in�Calgary,�operates�an�extensive�system�of�transit�buses�andlight�rail�transit
•�Availability of Hotels: The�Economist�magazine�in�2006,�ranked�Calgary�as�the�second�best�city�in�the�world�for�business�travel.�Calgaryhas�various�options�for�business�tourists,�from�high-end�five-star�hotels,�including�international�chains,�to�bed�and�breakfasts,�hostelsand�motels.�
Risk: City specific
•�Catastrophic risks: Calgary�has�witnessed�instances�of�tornadoes�and�floods,�which�could�potentially�cause�substantial�propertydamage.�Calgary�Emergency�Management�has�undertaken�various�measures�to�deal�with�such�incidents8
•�Political risks: Alberta�has�been�considered�to�be�politically�stable.�Past�governments�have�been�elected�with�large�majorities�and�havebeen�kept�in�power�for�a�long�time.
24
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Winnipeg
Quick facts
GeographicLocation
Situated in southeast Manitoba, Winnipeg can be reachedin about two hours by air from Toronto
Time Zone GMT -0600
Climate
Continental climate characterized by four distinct seasons.The average summer temperature is 25.4, while that inwinter is -12.9 degrees Celsius. The average annual rainfallis 41.6 cm while the average snowfall is 110.6 cm
Population1 719,200
Literacy rate2 99 percent
Languages English, French
Major industriesAerospace, Transportation, Biotechnology and HealthResearch, Agri-business and Food Processing, FinancialServices, Energy
1 www.canada.travel, Canadian Travel and Tourism website, December 20082 Destination Winnipeg, ICT Profile of Winnipeg, 20073 www.gov.mb.ca, Government of Manitoba website, December 2008
Sources: 1 Census metropolitan area (CMA) of Winnipeg, 20082 CIA 2007 (Literacy rate for Canada; literacy rates for individual cities were
not available
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Winnipeg has a quality education system in place, which facilitatesthe availability of a talent pool for IT-BPO companies
• Winnipeg has a sizeable bilingual workforce with communicationskills in English and French
• The city offers IT-BPO companies good infrastructure, quality officespace, technology parks and government incentives
• Winnipeg is one of the best cities in terms of overall businesscompetitiveness within Canada
• The city is well suited for housing a sourcing contact center andproviding customer management services
• The geographical proximity to the US and compatible time-zone isanother advantage for the city
• It is centrally located within Canada which provides access totalent from other cities in Canada.
City Introduction
•�Winnipeg�is�the�capital�of�the�Canadian�province�of�Manitoba,�and�its�largestcity1
•�Located�in�the�geographical�center�of�North�America,�Winnipeg�has�becomeone�of�Canada's�key�international�transportation�centers.�
Key IT-BPO companies (Services offered)
IBM (IT and BPO services)Hewlett Packard (IT andBPO services)
Emerging InformationSystems (Softwaredevelopment)
Convergys (BPO services)
Momentum Healthware(IT services)
Protegra (IT services)
Sources: Convergys company website; Destination Winnipegwebsite
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Winnipeg�houses�a�large�number�of�customer�contact�centers�for�Canadian�companiessuch�as�Air�Canada,�Canada�Post,�Canada�Revenue�Agency,�and�Royal�Direct�(RoyalBank)
•�The�ICT�sector�represents�three�percent�of�the�total�workforce�of�Winnipeg,�slightlybelow�the�national�average�offour�percent2.
Industry Profile – Size and Specifics
•�The�ICT�exports�of�Manitoba�in�2007�were�USD�185�million3
•�The�province�of�Manitoba�has�over�1,500�companies�operating�in�the�ICT�sector,�withnearly�80�percent�of�these�firms�located�in�Winnipeg2
•�Nearly�40�percent�of�the�workforce�in�the�ICT�industry�in�Winnipeg�was�engaged�incomputer�systems�design,�R&D,�and�information�services3
•�Winnipeg�offers�contact�center�and�software�development�services�especially�focusedon�financial�and�business�management�solutions,�customized�e-learning�processes,integrated�e-payment�solutions�and�financial�planning.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 Destination Winnipeg, ICT Profile of Winnipeg, 2007
2 http://www.pch.gc.ca/pc-ch/publctn/info/mb-eng.cfm, December 2008 (The French Immersionprogram provides instruction in most subject areas
in French and offers students a chance to become functionally bilingual)
3 www.destinationwinnipeg.ca, Destination Winnipeg website, December 2008
4 Robert Half Salary Guide, Canada, 2008
5 www.gov.mb.ca, Manitoba Government website, December 2008
6 CB Richard Ellis, Real estate in Winnipege, Third Quarter 2007
7 http://www.waa.ca/airportredevelopment, Winnipeg Airports Authority website, December 2008
8 Winnipeg.ca, Official city of Winnipeg website, December 2008
9 www.infc.gc.ca/index_e.shtml, Infrastructure Canada website, December 2008
Human Resources
•� Winnipeg�has�a�number�of�institutions�providing�IT-related�courses,�including�the�University�of�Manitoba,�the�University�of�Winnipeg,�andthe�Canadian�Mennonite�University,�and�two�technical�training�institutions,�the�Red�River�College�and�Winnipeg�Technical�College.�Closeto�10,000�students�graduate�from�post-secondary�educational�programs�every�year�in�Winnipeg1
•� About�4,500�students�are�enrolled�in�French�language�schools�and�17,600�in�the�French�Immersion�program�in�the�province2
•� Winnipeg�offers�a�highly�competitive�wage�rate�structure3.�Average�salaries�were�at�95.5�per�cent�of�the�national�average�in�20084
•� The�IT-BPO�industry�in�the�city�has�an�average�job�tenure�of�more�than�100�months5.
Infrastructure
•�Office space (IT Parks): Office�rents�in�Winnipeg�are�among�the�most�affordable�in�Canada,�with�vacancy�rates�for�class�A�office�spaceat�6.6�percent,�and�for�class�B�office�space�at�8.9�percent�in�20076.�The�city�has�approximately�30�industrial�parks�with�sizes�rangingfrom�27�to�240�hectares,�and�large�parcels�of�land�available�for�industrial�development5
•�Power supply: Winnipeg�has�reliable�power�supply.�The�cost�of�power�in�Winnipeg�is�also�lower�compared�to�other�major�cities�inCanada3
•�Telecom Infrastructure: MTS�Allstream�and�Shaw�Communications�Inc.�provide�telecommunications�services�in�Winnipeg3.�Basicbusiness�telephone�service�rates�are�among�the�lowest�in�Canada
•�National and International connectivity: Winnipeg�is�conveniently�located�on�the�Trans�Canada�Highway.�The�city�is�well�connected�byair,�road�and�railway�and�accessible�with�most�other�Canadian�cities.�Winnipeg’s�airport�is�undergoing�re-development.�A�new�airportterminal�is�under�construction�and�is�planned�for�completion�by�20107
•�Upcoming projects: A�number�of�industrial�parks�are�springing�up�in�rural�municipalities�just�outside�Winnipeg,�for�instance�theBrookside�Industrial�Park�north�of�the�city.�Some�of�the�existing�real�estate�properties�are�also�being�redeveloped.
State / city specific incentives for IT-BPO over and above country level incentives, if any5
•�The�province�of�Manitoba�provides�R&D�non-refundable�tax�credit�of�20�percent�applied�against�corporate�income�tax�payable
•�The�ICT�industry�in�Winnipeg�also�benefits�from�numerous�collaborative�efforts�that�bridge�the�private,�public�and�educational�sectors�onissue-specific�initiatives.
Quality of life
•�Cost of living: The�2007�family�expenditure�per�household�survey�by�Statistics�Canada�ranks�Winnipeg�among�the�most�affordablelocations�in�Canada.�The�cost�of�housing�in�Winnipeg�is�the�lowest�according�to�a�2007�comparison�of�10�cities,�including�Calgary,Toronto�and�Vancouver,�conducted�by�the�Canadian�Real�Estate�Association
•�Crime rate: Winnipeg�has�one�of�the�highest�crime�rates�in�Canada.�Car�theft,�homicide�and�breaking�in-and-entering�are�some�of�themajor�crimes�witnessed�in�the�city8
•�Pollution levels: Winnipeg�has�low�pollution�due�to�vast�forests�and�trees�surrounding�the�city.�Besides,�the�government�is�activelytaking�initiatives�to�reduce�emission�levels�and�plans�to�introduce�diesel-electric�hybrid�buses�in�early�20089
•�Ease of commuting: Winnipeg�Transit�and�Downtown�Spirit�offer�free�and�easy�bus�travel�in�Winnipeg.�Most�people�commute�to�workin�20�minutes�or�less1
• Availability of Hotels: Accommodation�in�Winnipeg�ranges�from�four-star�hotels,�including�international�chains,�to�affordable�motels.�
Risk: City specific
•�Catastrophic risks: Winnipeg�witnessed�floods�in�1997,�due�to�excess�snowfall�and�extreme�temperatures8.�The�city�has�introduced�theRed�River�Floodway�Expansion�Project,�due�to�be�completed�by�2010,�to�increase�flood�protection�for�its�residents9
•�Political risks: Low�political�risk�with�a�stable�government�within�the�province�and�the�city�
•�History of disruptions: There�are�no�recent�instances�of�major�disruptions�in�the�city�of�Winnipeg.
26
Chile
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Chile�follows�a�presidential�system,�based�on�the�1980�constitution.�The�Congress�has�anupper�house�comprising�38�members,�elected�for�a�period�of�8�years�and�partly�renewedevery�4�years;�and�a�lower�house,�with�120�members�who�are�all�elected�every�4�years.Chile�is�divided�into�15�regions,�each�of�which�is�headed�by�a�representative�appointed�bythe�President.�Every�region�is�further�divided�into�provinces,�with�a�provincial�governor�alsoappointed�by�the�President.
Independent�regions�provide�incentives�to�attract�investments�in�relatively�backward�areaswithin�the�country,�and�therefore,�the�investment�climate�may�vary�in�different�regions�tothat�extent.
Business and Investment ClimateForeign Direct Investment (FDI): In�2007,�the�country�attracted�FDI�worth�USD�14.5�billion,representing�8.8�percent�of�the�GDP.�The�FDI�rose�143�percent�from�the�2006�figure�of�USD5.96�billion2.
GDP growth: Chile’s�GDP�growth�in�2007�was�5.1�percent.�The�EIU�has�forecast�GDP�togrow�by�3.9�percent�in�2008�and�by�2.8�percent�in�20091.
Inflation: In�2007,�the�inflation�was�at�4.4�percent.�The�EIU�expects�inflation�to�gradually�fallfrom�its�2007�levels�in�2008�and�2009�to�reach�about�3�percent1.
IT-BPO Scenario in the countryAccording�to�the�research�firm,�Business�Monitor�International,�in�2007,�Chile's�IT�servicesmarket�was�estimated�to�be�around�USD�700�million2.�The�majority�of�demand�is�domesticand�led�by�the�large�companies.
According�to�Chilean�Association�of�Information�Technology�Companies�(ACTI),�the�country’sIT�industry�employs�close�to�75,000�people�and�has�more�than�500�active�IT�companies3.Some�of�the�multinational�companies�with�delivery�centers�include�Citigroup,�Shell,�GE,�andJPMorgan.�
Chile�currently�has�a�talent�pool�of�close�to�85,000�engineers�and�approximately�10,000engineers�are�added�every�year3.�Presently,�the�main�concentration�of�IT�activity�withinChile�can�be�found�in�the�capital�city,�Santiago.�
Some�of�the�large�IT�companies�from�the�country�include�Sonda,�Atos�Origin,�EDS,�TCS,IBM�and�Accenture.
Government incentives4
The�Chilean�Economic�Development�Agency�runs�a�program�called�Invest�Chile,�whichprovides�various�incentives�for�investment�in�the�high�technology�fields.�The�incentives�areequally�available�to�local�and�foreign�investors�for�investments�with�a�minimum�value�ofUSD�1�million.�These�include:
•�Co-funding�of�pre-investment�studies,�start-up�expenses,�R&D�and�investments�in�fixedassets�
•�Grants�for�the�development�of�human�resources.
Chile
Size of the country 756,946 sq. kms.
Population 16.6 million (2007)
Capital Santiago
Currency Chilean Peso (CLP)
1 USD = CLP (average) 509.44 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 230.9 billion (2007 est.)
• GDP per capita in PPP: USD 13,910 (2007 est.)
• CPI: 4.4 percent (2007 est.)
• Unemployment rate: 7.0 percent (2007 est.)
• FDI stock per capita: USD 5,512 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating A / Stable
Standard & Poor’s ForeignCurrency Risk Rating
A+ / Stable / A-1
Ease of Doing Business Rank(2009)
40
Rigidity of Employment Index(2009)
24
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008
2 Business Monitor International and US Commerical Service websitehttp://www.buyusa.gov/chile/en/121.html
3 Chilean Association of Information Technology Companies
4 Chilean Economic Development Agency
Sources: www.eiu.com, www.cia.gov, www.gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Santiago
28
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Santiago
Quick facts
GeographicLocation
Located in central Chile, Santiago can be reached fromNew York in about 10 hours and 30 minutes
Time Zone GMT -0400
ClimateMild, Mediterranean climate with two pronounced seasons– summer and winter. The average temperature is 14degrees Celsius. The average annual rainfall is 38.1 cm
Population1 5,822,3162
Literacy rate1 95.7 percent
Languages Spanish, English
Major industriesFinancial services, trading, machinery and electronicequipments, food processing
1 Instituto Nacional de Estadísticas (2002)
2 Invest Chile: Publication on Skilled Human Resources
3 http://www.hightechchile.com/opportunities/global_services/business_processes_(bpo)
Sources: 1 Instituto Nacional de Estadísticas (2002)2 Data for Santiago Urban Agglomeration
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Santiago offers a large pool of graduates, as well as professionalsfrom IT-related courses for the IT-BPO industry
• The city has good infrastructure for IT-BPO services includingreliable telecom, extensive public transport and technology parks
• The government of Chile provides financial and other support forthe high-tech industries and setting up an IT-BPO business in Chileis fairly easy
• A large number of companies source Spanish language call centerand BPO services from the city
• English language skills in the population are improving, whichpoints to future potential for sourcing multi-lingual services fromSantiago2
• The city is well suited for near-shore business due to a similartime-zone and cultural affinity with the US
• Santiago offers significant cost advantage in terms of competitivewage-rates, and lower operating and living costs compared withother cities in the Americas.
City Introduction
•�Santiago,�the�capital�and�largest�city�in�Chile1,�is�home�to�more�than�a�third�ofthe�country’s�population
•�It�is�also�an�important�financial�center�in�Chile�as�well�as�in�South�America.
Key IT-BPO companies (Services offered)
Tata Consultancy Services(BPO services)
Shell (Call center)
Experian (Softwaredevelopment and ITservices)
Yahoo (Knowledgecenter)
Accenture (IT and BPOservices)
Citigroup (Softwaredevelopment and ITservices)
Source: Chile Economic Development Agency
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Santiago�has�witnessed�rapid�advancement�in�information�technology�and�BPOservices,�as�numerous�companies�have�set�up�their�shared�service�hubs�and�customercontact�centers�in�the�city
•�Companies�like�Citigroup,�BHP�Billiton,�Shell,�Evalueserve�and�TCS�have�set�up�offshorecenters�in�Santiago
•�The�city�has�large�presence�in�Spanish-based�customer�support.
Industry Profile – Size and Specifics
•�The�combined�IT-BPO�exports�from�the�city�are�estimated�to�be�approximately�USD�300to�350�million3
•�There�are�more�than�130�IT-BPO�companies�in�Santiago3
•�The�prominent�IT-BPO�services�sourced�from�Santiago�include�IT�services,�customersupport,�finance�and�accounting,�human�resources,�marketing�and�technical�support.
29
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�There�are�more�than�10�large�universities�in�and�around�Santiago,�including�the�University�of�Santiago,�one�of�the�oldest�publicuniversities�in�Chile.�Around�10,000�fresh�graduates�are�added�to�the�existing�talent�pool�every�year1
•�Government�promotion�of�IT�related�careers�has�increased�enrollment�for�technical�education�three-fold�in�the�last�decade.�In�2006,�closeto�50,000�students�were�enrolled�in�technology�related�courses2
•�English�language�proficiency�is�average.�The�government�has�been�taking�initiatives�to�improve�English�language�skills�includingobligatory�English�education�from�5th�grade�in�schools3.�It�has�developed�a�National�Register�of�English�Speakers,�with�employmentqualifications�of�more�than�38,000�Chileans�with�certified�English�language�skills4.
Infrastructure
•�Office space (IT Parks): Santiago�faces�a�shortage�of�class�A�office�space,�with�vacancy�rates�as�low�as�0.25�percent�in�3Q�20085.However,�more�than�360,000�sq.�mts.�of�class�A�office�space�is�currently�under�construction�and�likely�to�enter�the�market�between�theend�of�2008�and�20105
•�Power supply: Chile�currently�faces�shortage�of�power�supply,�however�electricity�costs�are�at�par�or�lower�than�most�Latin�Americancities6.�There�are�initiatives�to�increase�the�power�production�capacity�through�construction�of�Liquefied�Natural�Gas�(LNG)�terminals�andhydroelectric�dams,�which�are�expected�to�improve�the�power�situation�by�20127
•�Telecom Infrastructure: Santiago�offers�quality�telecom�infrastructure�and�high�speed�connectivity.�Chile�connects�to�Latin�America�andthe�rest�of�the�world�via�three�international�fiber�optic�networks�(more�than�80�Gbps)�and�satellite�services3.�Chile�also�scores�high�onpenetration�of�technology�(mobile�phones,�internet�connections)�amongst�Latin�American�countries
•�National and International connectivity: The�international�airport�at�Santiago�offers�direct�connectivity�to�major�locations,�in�the�USand�Europe
•�Upcoming projects: The�University�of�Chile�is�building�a�Technology�Park�over�a�1,000�hectare�space,�including�a�9,000�sq.�mts.Innovation�and�Business�Center�and�an�incubator3.
State/ city specific incentives for IT-BPO over and above country level incentives, if any6
•�A�grant�of�up�to�60�percent�or�a�maximum�of�USD�30,000�to�cover�pre-investment�studies�for�high�tech�companies�investing�USD500,000�or�more
•�This�grant�is�to�partially�fund�the�cost�of�pre-feasibility,�location,�due�diligence�or�other�such�studies�required,�prior�to�the�consolidation�ofthe�investment.�
Quality of life
•�Cost of living: Santiago�offers�a�good�quality�of�life�and�numerous�options�for�low-cost�high-standard�housing�and�schooling
•�Crime rate: According�to�a�study�by�America�Economia�(based�on�2004�data),�Santiago�has�one�of�the�lowest�rates�of�violent�crime�inLatin�America
•�Pollution levels: Santiago�has�high�air�pollution�due�to�the�concentration�of�industry�and�a�large�number�of�vehicles.�Further,�the�city�islocated�in�a�valley�with�geographic�characteristics�that�do�not�support�the�dispersal�of�air�pollutants
•�Ease of commuting: The�city�offers�a�fairly�modern�and�extensive�transport�system�comprising�a�well-linked�network�of�Metro,�busesand�taxis.�The�Metro�system�in�the�city�is�currently�under�expansion
•�Availability of Hotels: The�city�has�numerous�lodging�options�ranging�from�premium�hotels,�including�international�chains,�to�budgetaccommodation.
Risk: City specific
•�Catastrophic risks: Chile�is�located�in�an�active�seismic�zone�and�has�had�a�history�of�earthquakes,�which�has�led�to�loss�of�life�andproperty�in�the�past8
•�Political risks: The�government�has�taken�measures�to�increase�the�efficiency�of�the�public�administration�and�to�ensure�transparency�ingovernance,�which�has�led�to�a�fairly�stable�political�structure
•�History of disruptions: Civil�disturbances�occur�infrequently,�with�a�few�instances�of�domestic�violence�in�the�last�few�years6.
1 Americas Society and Council of the Americas website
2 Ministry of Education, Chile
http://www.mineduc.cl/index0.php?id_portal=1
3 Foreign Investment, Chile website
4 www.apec.org/etc/medialib/apec_media_library/downloads/workinggroups/
hrdwg/mtg/2005/pdf.Par.0050.File.v1.1
5 CB Richard Ellis, 3Q 2008
6 http://www.hightechchile.com/incentives_and_services
7 www.bloomsburyminerals.com/chileanpowersupply.pdf
8 OSAC Chile 2008 Crime & Safety Report
30
Mexico
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
The�United�Mexican�States�is�a�federal�republic�whose�government�is�based�on�apresidential�system.�The�political�system�is�presidential,�bicameral�and�federal�(31�states).The�President�is�elected�for�a�non-renewable�six-year�term�and�appoints�the�cabinet.�Mexicohas�31�states�divided�into�municipalities,�and�the�Federal�District�(Mexico�City).�Most�taxesin�Mexico�are�federal;�therefore,�states�have�a�limited�opportunity�to�offer�tax�incentives.However,�Mexican�states�have�begun�competing�aggressively�with�each�other�forinvestments,�and�most�have�development�programs�for�attracting�industry.�
Business and Investment ClimateForeign Direct Investment (FDI): Mexico�receives�the�second-largest�inflow�(after�Brazil)�ofFDI�of�any�country�in�Latin�America.�FDI�inflows�totalled�USD�24.7�billion�in�2007,�up�fromUSD�19.2�billon�in�20061.
GDP growth: Mexico's�GDP�recorded�a�growth�of�3.2�percent�in�2007.�The�EIU�expectsMexico's�GDP�to�grow�slowly�to�1.9�percent�in�2008�and�0.9�percent�in�2009�(previously�2.3percent�and�1.6�percent)1.
Inflation: Following�an�upward�trend�in�January-August�2008,�consumer�price�inflationabated�in�the�first�half�of�September�2008�to�5.43�percent�owing�to�easing�food�prices1.The�EIU�anticipates�inflation�to�reach�7.1�percent�in�2008�and�5�percent�in�2009.
IT-BPO Scenario in the countryThe�proximity�to�the�US�market,�low-cost�qualified�personnel,�and�access�to�the�LatinAmerican�market�are�some�of�the�advantages�for�Mexico�in�IT-BPO�sector.�The�IT-BPOexport�for�2007�was�USD�12.3�billion3.
Currently,�the�IT-BPO�industry�comprises�nearly�500,000�IT�professionals.�In�addition�to�this,close�to�65,000�new�IT�professionals�are�graduating�from�universities�or�technical�schoolseach�year3.�Companies�like�Getronics,�Unisys,�IBM,�TCS,�Softtek,�Manhattan�Associateshave�bases�in�Mexico.�
MexicoIT�is�an�initiative�executed�by�the�National�Chamber�of�Electronics,Telecommunications�and�Information�Technologies�(CANIETI),�an�industry�association�ofleading�IT�companies�in�Mexico,�and�is�supported�by�the�Mexican�Ministry�of�Economythrough�the�Program�for�the�Development�of�the�Software�Industry�(PROSOFT)3.�The�mainobjective�of�the�initiative�is�to�promote�Mexico�in�the�IT�space�and�as�a�world�class�near-shore�alternative.
Some�of�emerging�cities�in�IT-BPO�sector�include�Queretaro�and�Guadalajara�with�otherestablished�locations�like�Mexico�City,�Juarez�and�Monterrey.
Government incentives3
IT-BPO�companies�established�in�Mexico�can�receive�cash�grants�of�up�to�50�percent�of�thetotal�cost�of�their�project�and�tax�credit�of�up�to�30�percent�of�the�total�R&D�expense.�
Mexico
Size of the country 1,964,375 sq. kms.
Population 105.7 million (July 2007)
Capital Mexico City
Currency Mexican Peso (MXN)
1 USD = MXN (average) 11.25 (2008)
Main macroeconomic indicators:
• GDP in PPP: USD 1347.1 billion (2007 est.)1
• GDP per capita in PPP: USD 12,390 (2007 est.)1
• CPI: 3.4 percent (2007 est.)2
• Unemployment rate: 3.7 percent (2007 est.)1
• FDI stock per capita: USD 2,400 (2007 est.)1
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BBB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BBB+ / Stable / A-2
Ease of Doing Business Rank(2009)
56
Rigidity of Employment Index(2009)
48
Country Snapshot
1 EIU www.eiu.com, various pages, December 2008
2 CIA Factbook - https://www.cia.gov/library/publications/the-world-factbook/geos/mx.html
3 Mexico IT/ Select, Mexico (the figure includes USD 7.2 billion worth of hardware exports)
http://www.mexico-it.net/index.php?option=com_content&view=category&layout=blog&id=11&Itemid=12
Sources: www.eiu.com, www.cia.gov, www.gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Ciudad Juárez
Monterrey
GuadalajaraQuerétaro
Mexico City
32
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Guadalajara
Quick facts
GeographicLocation
Situated in mid-Western Mexico, it can be reached fromcapital Mexico City by air in about an hour
Time Zone GMT – 0600
ClimateMild climate with two major seasons - summer and winter.The average temperature is 19.2 degrees Celsius, whileaverage annual rainfall is 98.8 cm
Population1 1,600,940
Literacy rate1 92 percent
Languages Spanish, English
Major industriesFood & Beverages, Textile, Tequila, Auto-parts, Agriculturalproducts, Electronics and Communications
1 Mexico-IT http://www.mexico-it.net/index.php?option=com_content&view=section&layout=blog&id=1&Itemid=32 Information Technology Institute of Jalisco presentation www.ijalti.org.mx/Ijalti-Presentation.pdf
Source: 1 Mexico-IT (2007)
Key drivers for the city to emerge as a favorable IT-BPOdestination
• The city has prominent educational institutions that produce morethan 18,000 graduates in IT-related courses every year1
• The geographic proximity to the US and similar time-zone is anadvantage for the IT-BPO industry
• The city can leverage its Spanish language proficiency to providecontact center services in Spanish
• The talent pool in the city is also suitable for providing outsourcedsoftware and engineering design services
• The city has a well-developed infrastructure of quality office space,technology parks and transport system for the IT-BPO industry
• The city’s government, industry and academia collaborate onvarious sector strategies and technological research to strengthenthe high-tech cluster in the city
• The state government of Jalisco has targeted improvements inadministrative processes resulting in reduced time taken to set upa business in the state.
City Introduction
•�Guadalajara�is�Mexico’s�second�largest�city,�and�the�capital�of�the�state�ofJalisco1
•�Known�as�the�Mexican�Silicon�Valley,�Guadalajara�has�a�large�concentration�ofcomputer�and�electronics�companies.
Key IT-BPO companies (Services offered)
IBM (IT and BPO services)TCS (IT and BPOservices)
Hewlett Packard (Sharedservices center)
Perot Systems (IT andengineering services)
Intel (Design center) Teletech (BPO services)
Sources: Company websites of IBM, HP, TCS, Perot; CRMToday article
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�New�opportunities�are�emerging�for�Mexico’s�Silicon�Valley�in�multimedia�services�likedigital�animation,�special�effects�and�videogames
•�So�far,�there�are�only�small�companies�in�the�multimedia�services�industry�in�the�citywith�fewer�than�20�employees1
•�A�large�number�of�engineering�design�centers�are�also�located�in�the�city.
Industry Profile – Size and Specifics
•�The�combined�ICT�exports�of�the�city�are�estimated�at�USD�16�billion�in�20072
•�The�IT�cluster�in�Jalisco�has�more�than�70�international�companies�and�over�3000employees2
•�The�prominent�IT-BPO�services�sourced�from�Guadalajara�include�softwaredevelopment,�embedded�software,�IT�services�especially�firmware�design�and�testingand�multimedia.
33
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Guadalajara�is�a�center�for�education�in�Jalisco,�producing�more�than�18,000�IT�graduates�per�year1.�Prominent�educational�institutes�inthe�city�include�Universidad�Panamericana,�ITESO,�Universidad�de�Guadalajara,�Monterrey�Institute�of�Technology�(ITESM)�and�theUniversidad�Autonoma�de�Guadalajara�(U.A.G)
•�The�city�has�good�availability�of�trained�technical�and�engineering�talent.�Guadalajara�is�ranked�high�for�availability�of�skilled�labor�inMexico,�especially�for�electronics�and�technology1
•�Guadalajara�has�a�stable�workforce�and�lower�attrition�rates�compared�to�larger�cities�in�Mexico.
Infrastructure
•�Office space (IT Parks): Guadalajara�is�experiencing�a�boom�in�construction�of�office�space.�The�vacancy�rate�is�currently�about�14percent2.�There�is�a�growing�trend�in�the�development�of�mixed-use�projects�that�integrate�office,�residential,�and�hotel�components�
•�Power supply: Power�supply�is�not�always�reliable�and�companies�have�their�own�generators�to�mitigate�the�situation.�Power�is�relativelyexpensive�even�when�compared�with�some�of�the�US�cities,�at�USD�0.24�per�kWh3
•�Telecom Infrastructure: Guadalajara�is�serviced�by�adequate�telecom�infrastructure�supported�by�optical�fiber�network.�Telmex�is�theprincipal�provider�in�Jalisco�state.�Guadalajara�is�planning�to�set�up�Worldwide�Interoperability�for�Microwave�Access�(WiMAX)infrastructure,�to�provide�more�connectivity�and�higher-speed�Internet�access3
•�National and International connectivity: Guadalajara�provides�access�to�the�Pacific�NAFTA�corridor,�connecting�major�US�and�Canadiancities4.�The�city�is�also�well�linked�with�Mexico�City�and�with�Mexico’s�central�and�northern�markets�by�a�railroad�network.�The�MiguelHidalgo�International�Airport�located�in�Guadalajara�serves�numerous�local�and�international�daily�flights,�including�direct�flights�to�LosAngeles,�Houston,�Dallas,�Chicago,�San�Francisco,�and�Portland4�
•�Upcoming projects: The�second�phase�of�the�Software�Park�in�Ciudad�Guzman,�which�will�add�2,396�sq.�mts.�of�space,�is�likely�to�beoperational�by�20085.�
State/ city specific incentives for IT-BPO over and above country level incentives, if any6
•�Complete�exemption�from�payroll�tax�for�new�companies�and�50�percent�discount�on�payroll�taxes�for�companies�creating�new�jobs�
•�State�contribution�for�training�programs�for�employees�at�technical�and�professional�levels�
•�Special�incentives�for�R&D�projects.
Quality of life
•�Cost of living: Mexican�cities,�in�general,�have�a�cost�advantage�over�cities�in�the�US7.�The�quality�of�living�in�Guadalajara�is�alsoregarded�as�good,�within�Mexico
•�Crime rate: Crime�is�led�by�drug�cartels�in�the�city.�Under-reporting�of�crime�incidences�to�the�police�is�a�problem,�therefore�official�crimerates�are�not�very�reliable8
•�Pollution levels: Air�pollution�levels�in�Guadalajara�are�quite�high�due�to�a�large�number�of�vehicles�on�the�road.�Jalisco�has�a�pollutionstandard�Index�named�Índice�Metropolitano�de�la�Calidad�del�Aire�(IMECA)�which�regulates�the�quality�of�the�air,�and�helps�putmeasures�to�control�pollution�in�place9
•�Ease of commuting: Guadalajara�metropolitan�transit�system�includes�metro�trains,�local�buses�and�electric�bus�routes.�However,increasing�number�of�trucks�and�cars�on�the�main�roads�is�causing�traffic�congestion�in�the�city
•�Availability of Hotels: Guadalajara�has�a�well�developed�hotel�infrastructure�ranging�from�five-star�to�budget�hotels,�includinginternational�chains.
Risk: City specific
•�Catastrophic risks: Guadalajara�lies�in�seismic�zone�II�and�is�an�earthquake-prone�region,�though�no�major�earthquake�has�occurred�sofar8.�The�city�is�surrounded�by�10�volcanoes,�of�which�one�is�active.�Flooding�is�common�in�some�parts�of�the�city�during�heavy�rains.Cyclones�are�also�common8
• Political risks: Low�risk�with�stable�political�climate.�The�ruling�party�in�Jalisco�state�has�been�in�power�since�1995
•�History of disruptions: Guadalajara�witnessed�minor�rioting�during�the�summit�of�European�Union�(EU)�and�Latin�American�leaders�in2004.�There�have�been�no�major�incidences�of�rioting�in�the�last�two�years.
1 Mexico-IT http://www.mexico-it.net/index.php?option=com_content&view=section&layout=blog&id=1&Itemid=3
2 CB Richard Ellis, October 2008
3 Guadalajara Reporter Article http://guadalajarareporter.com/content/view/22538/49/
4 Team Nafta website: http://www.teamnafta.com/index.php/Market-Profiles/guadalajara.html
5 IJALTI presentation - www.ijalti.org.mx/Ijalti-Presentation.pdf
6 IDC report on investment opportunities in Jalisco
7 ProMexico http://www.promexico.gob.mx/wb/Promexico/invest_in_mexico
8 Mexico 2008 Crime & Safety Report: Guadalajara
9 SIMAT website, Mexican government
http://www.sma.df.gob.mx/simat2/ingles.php?opcion=1
34
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Queretaro
Quick facts
GeographicLocation
Queretaro, located in central Mexico, can be reached fromMexico City in about two hours by road
Time Zone GMT -0600
ClimateHot and dry in the summer, and mild during the winter. Theaverage temperature is 22 degrees Celsius, while theannual average rainfall is 96.6 cm
Population1 877,837
Literacy rate1 95.8 percent
Languages Spanish, Otomi, English
Major industriesAutomotive, metals, chemicals, consumer goods, apparels,food processing
1 Queretaro Government presentation2 ProMexico website3 Queretaro Economic Yearbook, 2007
Sources: 1 Mexico IT, Mexico Site Selection Website (2007)Other sources: Queretaro Incentive Travel Planner
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Queretaro has a trained talent pool, and also attracts professionalsfrom neighboring areas in Mexico
• The city can also serve as a Tier II alternative or spoke centers tocompanies in Monterrey and Mexico City
• The talent pool in Queretaro is well suited for technical servicesand Spanish contact center services
• The 2004-09 development plan for the city aims to strengthen theairport, highways and industrial infrastructure1
• The government is taking initiatives to bring in administrativederegulation and simplification which has effectively shortened thetime taken to set up in the city
• The city’s proximity to the US offers a near-shore advantage andsignificantly lower costs of operation2.
City Introduction
•�Queretaro,�formally�known�as�Santiago�de�Queretaro,�is�the�capital�of�theMexican�state�of�Queretaro
•�It�was�ranked�as�one�of�the�top�10�North�American�cities�of�the�future�by�theFDI�Magazine�in�2007-08.
Key IT-BPO companies (Services offered)
Hildebrando (IT and BPOservices)
Eidon (Softwaredevelopment)
Praxis (IT services)Kio Networks (ITservices)
NIIT (IT services)Triara (Data centerservices)
Sources: Company websites of Hildebrando, Praxis, SouthAmerican Business Information article
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Queretaro�ranks�fourth�in�Mexico�in�terms�of�IT�sector�exports�trailing�only�the�FederalDistrict,�Nuevo�Leon,�and�Jalisco3
•�The�state�government�is�focusing�on�making�the�state�a�leader�in�embedded�softwareand�contact�center�services�in�Mexico.
Industry Profile – Size and Specifics
•�IT�exports�of�the�state�of�Queretaro�amounted�to�USD�17.7�million�in�20073
•�There�are�more�than�60�IT-BPO�companies�operating�in�the�city,�with�close�to�3,800employees�in�software�development�and�a�further�6,200�in�contact�center�services1
•�The�IT�services�provided�from�Queretaro�include�embedded�software�development,�ITconsulting,�data�centers,�infrastructure�management,�application�development�andtesting
•�Queretaro�also�offers�BPO�services�like�contact�centers,�data�mining,�market�analysis,finance�and�accounting�services,�and�loan�application�processing.
35
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Queretaro’s�educational�institutes�produce�more�than�2,000�technical�graduates�and�1,500�IT�graduates�every�year1.�The�NationalAutonomous�University�and�National�Polytechnic�Institute�are�two�of�the�most�prestigious�universities�in�Queretaro.�Another�importantschool�is�the�Monterrey�Institute�of�Technology’s�(ITESM)�Queretaro�campus
•�Vocational�education�is�focused�on�automotive,�aerospace�and�IT,�and�universities�and�high�schools�in�the�region�have�entered�intotechnical�relationship�agreements�with�companies�in�and�around�the�city�to�develop�talent
•�The�proficiency�in�English�is�currently�relatively�limited,�which�can�restrict�the�talent�pool�for�bi-lingual�services
•�Queretaro�has�lower�attrition�rates�than�those�in�other�destinations�in�Mexico.�A�majority�of�the�workforce�is�local.
Infrastructure
•�Office space (IT Parks): Queretaro�has�five�major�industrial�parks�which�house�the�foreign�companies�operating�in�the�city.�Apart�fromthe�industrial�parks,�land�to�construct�office�buildings�is�available�and�expansion�or�refurbishing�of�existing�real�estate�is�also�common
•�Power supply: Power�supply�is�not�uninterrupted,�but�Queretaro�has�fewer�power�failures�than�other�cities�in�Mexico.�Companies�havetheir�own�generators�to�meet�the�short�supply2.
•�Telecom Infrastructure: The�city�offers�fiber�optic�infrastructure�and�high�bandwidth�communication�facilities.�Telmex�is�the�principalprovider�in�the�city�
•�National and International connectivity: Queretaro�has�well�maintained�toll�roads�connecting�to�major�Mexican�cities.�The�linkage�tothe�North�American�Free�Trade�Agreement�(NAFTA)�Highway,�enables�access�to�the�border�cities�of�the�US.�The�Queretaro�Internationalairport�offers�domestic�and�international�flights�to�American�and�Mexican�cities�
•�Upcoming projects: The�construction�of�the�Parque�Microindustrial�Santiago�started�in�December�2007,�to�offer�options�to�smallcompanies�to�install�or�relocate.�This�park�is�expected�to�be�operational�in�20093.
State/ city specific incentives for IT-BPO over and above country level incentives, if any4
•�The�State�of�Queretaro�provides�complete�exemption�on�State�Payroll�Tax�
•�Queretaro�has�created�a�special�program�to�promote�ICT�Industry,�named�QSoft.�This�program�provides�incentives�for�development�ofproductive�projects,�as�well�as�for�training�and�certification�employees�in�specific�technologies�and�platforms
•�The�Government�of�Queretaro�provides�a�preferential�rate�in�payment�of�rights�in�the�Public�Registry�and�assistance�in�infrastructurethrough�the�construction�of�special�works.
Quality of life
•�Cost of living: The�cost�of�living�in�Queretaro�is�much�lower�than�that�in�other�larger�cities�in�Mexico.�Queretaro�was�ranked�third�inReforma�newspaper’s�“Third�National�Quality�of�Life�in�Mexico�Survey”
•�Crime rate: Queretaro�is�regarded�as�the�third�safest�city�in�Mexico,�with�low�crime�rates5
• Pollution levels: Being�a�major�industrial�center,�some�pollution�is�witnessed,�especially�in�the�congested�areas�of�the�city
•�Ease of commuting: Queretaro�has�a�good�road�network,�higher�compared�to�the�national�average.�However,�traffic�congestion�can�bean�issue�in�the�industrial�areas
•�Availability of Hotels: The�city�has�more�than�14�hotels�of�the�four-star�and�above�category,�including�international�hotel�chains6,�and�anumber�of�budget�hotels.
Risk: City specific
•�Catastrophic risks: Queretaro�lies�in�seismic�zone�II�with�low�earthquake�risk.�However,�the�city�is�prone�to�floods�during�the�rains.�Inthe�last�few�years,�Queretaro�has�witnessed�minor�floods
•�Political risks: There�is�relative�political�stability�in�the�state,�and�the�ruling�party�is�reasonably�pro-business
•�History of disruptions: The�city�has�not�witnessed�incidences�related�to�civil�unrest�or�terrorism.
1 Mexico-IT
http://www.mexico-it.net/index.php?option=com_content&view=section&layout=blog&id=1&Itemid=3
2 Queretaro Real Estate website
3 Municipio de Queretarohttp://www.municipiodequeretaro.gob.mx/modules.php?name=News&file=article&sid=1310
4 Team Nafta http://www.teamnafta.com/index.php/Market-Profiles/queretaro.html
5 Queretaro state government presentation
www.queretaro.gob.mx/sedesu/DESECO/FOMIND/contenidos/whyqueretaro.pps
6 VisitMexico.comwww.visitmexico.com/work/sites/Visitmexico/resources/LocalContent/6333/9/queretaro_cg.pdf
36
United States ofAmerica
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
United�States�is�a�Constitution-based�federal�republic.�The�President�is�elected�by�popularvote�via�an�electoral�college�for�up�to�two�four-year�terms.�The�legislature�is�bicameral�andconsists�of�100�senate�members�and�435�members�of�the�house�of�representatives.Administratively,�the�country�is�divided�into�50�states�and�one�district.�States�can�offerindependent�incentives�to�investors�and�the�investment�climate�can�differ�among�states.
Business and Investment ClimateForeign Direct Investment (FDI): FDI�into�the�US�continued�its�upward�trend,�reachingUSD�199.3�billion�in�2007,�up�from�USD�183.6�billon�in�20061.
GDP growth: After�substantial�slowing�in�2007,�GDP�growth�is�likely�to�weaken�further�in2008.�The�EIU�expects�growth�to�slow�to�1.8�percent�in�2008,�hit�by�the�downturn�in�thehousing�market,�the�financial�crisis�and�the�weakening�of�the�labor�market.�Growth�is�likelyto�continue�to�weaken�sharply�in�2009,�to�0.6�percent.
Inflation: The�EIU�expects�the�US�average�consumer�price�inflation�to�ease�in�2009�from�itsrecent�high.�The�EIU�forecast�that�consumer�prices�may�rise�by�an�average�rate�of�4.4percent�in�2008�and�by�just�2.6�percent�in�2009.
IT-BPO Scenario in the countryThe�US�is�one�the�key�markets�for�outsourcing�demand,�and�is�also�the�largest�serviceprovider�currently2.�The�combined�spending�on�IT-BPO�by�the�US�is�estimated�to�be�USD1.07�trillion�in�20072,�accounting�for�45�percent�of�the�global�IT�spending�and�about�66percent�of�the�global�BPO�spending2.
The�Information�Technology�Association�of�America�(ITAA)�is�the�high-tech�industryassociation�working�to�maintain�America’s�role�as�the�leading�source�for�innovation.�Itrepresents�and�enhances�the�competitive�interests�of�the�US�information�technology�andelectronics�industries.�
Government incentives3
Most�states�in�the�US�have�an�Economic�Development�Agency�with�extensive�fundsavailable�for�investment�incentives�that�include�tax�breaks,�training�grants,�land�purchaseassistance�and�other�benefits.�There�is�strong�competition�to�attract�the�best�companiesand�discretionary�incentives�are�often�decided�on�a�case-by-case�basis.
United�States�of�America
Size of the country 9,161,923 sq. kms.
Population 301.6 million (2007)
Capital Washington, DC
Currency US Dollar (USD)
1 USD = USD (average) 1.00
Main macroeconomic indicators:1
• GDP in PPP: USD 13,808 billion (2007 est.)
• GDP per capita in PPP: USD 45,851 (2007 est.)
• CPI: 4.5 percent (2007 est.)
• Unemployment rate: 4.6 percent (2007 est.)
• FDI stock per capita: USD 6,950 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating AA / Stable
Standard & Poor’s ForeignCurrency Risk Rating
AAA / Stable / A-1+
Ease of Doing Business Rank(2009)
3
Rigidity of Employment Index(2009)
0
Country Snapshot
1 EIU www.eiu.com, Economist Intelligence Unit website, various pages, December 2008
2 IDC estimates IDC Predictions 2008: The Hyper-Disrupted IT Industry Takes Root
3 FDI Magazine
http://www.fdimagazine.com/news/fullstory.php/aid/187/Labyrinth_of_incentivesUnited_States.html
Sources: www.eiu.com, www.cia.gov, www.gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Seattle
Boise
San Jose
California region(Silicon Valley)
IndianapolisNew York
38
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Boise
Quick facts
GeographicLocation
Boise is situated in a wide river valley at the foot of Rockymountains, and can be reached from Seattle by air in aboutan hour and 30 minutes
Time Zone GMT -0700
Climate
Climate is tempered year-round by air from the PacificOcean, with three seasons: summer, autumn and winter.The annual average temperature is 10.5 degrees Celsius.The average annual rainfall is 30.7 cm and annual averagesnowfall is 54.1 cm
Population1 567,640
Literacy rate2 99 percent
Languages English
Major industriesDefense equipment manufacturing and related services,Forestry, Computer components / systems, Tourism
1 City of Boise website http://www.cityofboise.org/CityGovernment/AboutBoise/
2 City of Boise News Releasehttp://www.cityofboise.org/Departments/Mayor/NewsReleases/2008/page30377.aspx
These rankings are based on growth in population, jobs and income; overall cost of living andthe number of quality jobs in technology, education, and professional and technical services
3 http://www.industrytoday.com/article_view.asp?ArticleID=F310
4 High-tech includes high-tech manufacturing, communications services, and software andcomputer-related services
5 Boise, Idaho: An Overview of the High-Technology Economy in the Treasure Valley. WhitePaper written by Heike Mayer, Ph.D., Assistant Professor, Urban Affairs and Planning Program,Virginia Tech - Alexandria Center (February 2008)
6 Idaho Department of Commerce http://idahosea.org/Member_Companies/
Sources: 1 CIA 20062 CIA data for U.S. (literacy rates by city are not available)
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Boise has a number of reputed education institutions, including theBoise State University that produce a technical talent pool
• An incentive system and easy funding has promoted a largenumber of start-ups in Boise. This has helped create a culture ofenterpreneurship and an injection of talent and ideas into the city
• Kiplinger Personal Finance magazine named the city of Boise as thefourth best city in the country to “Live, Work and Play” for 20082
• Companies locating in Boise have the benefit of onshoreoperations combined with a lower cost of living compared withother cities in the US3.
City Introduction
•�Boise�is�the�capital�of�Idaho�state
•�It�is�also�Idaho’s�largest�city�and�the�center�of�commerce�and�politics�for�thestate1
Key IT-BPO companies (Services offered)
Hewlett Packard (ITservices)
Microsoft (IT services)
SCP Global Technologies(BPO services)
MobileDataforce (ITservices – mobilesoftware)
Synoptek (IT services)Keynetics Inc. (R&Dservices)
Sources: Company websites of Microsoft, Synoptek, BoiseValley Economic Partnership
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Boise’s�high�tech4 industry�started�in�the�1970s�with�companies�like�Hewlett�Packardand�Micron�Technology�setting�up�base�in�the�city
•�The�city�plans�to�take�advantage�of�the�onshore�trend�taking�place�in�the�US�now
•�Boise�is�building�its�software�industry�by�encouraging�start-ups�and�entrepreneurship
•�Microsoft�acquired�a�local�software�development�firm,�ProClarity�in�2006.
Industry Profile – Size and Specifics
•�There�are�close�to�34,081�high�tech�workers�employed�in�Boise’s�industry5
•�The�city�is�characterized�by�small�and�medium�enterprises.�According�to�the�IdahoDepartment�of�Commerce,�the�Boise�area�has�around�400�software�and�information-technology�companies6
•�Services�offered�from�Boise�include�embedded�software�and�firmware�development.
39
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�The�city�is�home�to�institutions�such�as�BSU�College�of�Engineering;�ITT�Technical�Institute1
•�Boise�has�a�higher�rate�of�number�of�students�graduating�(37�percent)�compared�to�the�national�average�of�27�percent2
•�The�total�number�of�graduates�passing�out�annually�out�of�the�Boise�State�University�is�about�6,500.�The�city�however�faces�a�talentshortage.�In�2007,�the�BSU�graduated�just�28�students�with�computer-science�degrees3.
Infrastructure
•�Office space (IT Parks): There�is�1.9�million�sq.mts.�of�office�space�in�Boise�and�the�city�has�a�vacancy�rate�of�9�percent4
•�Power supply: Idaho�Power,�the�company�that�supplies�electricity�to�Boise,�no�longer�has�a�power�surplus,�and�would�need�to�add1300MW�to�meet�"current"�demand3;�expected�to�be�added�after�20123
•�Telecom Infrastructure: Time�Warner�Telecom�(now�TW�Telecom)�provides�complete�voice,�data�and�network�solutions,�with�nearly�100route�miles�of�local�fiber�network�in�the�city�of�Boise5
•�National and International connectivity: Boise�has�several�direct�air�connections�to�cities�such�as�Denver,�Phoenix,�Seattle,�Chicago,Los�Angeles�and�San�Francisco.�The�city’s�airport�has�been�newly�renovated
•�Upcoming projects: Boise�WaterCooler,�a�business�development�center,�is�being�set�up�to�provide�office�space�and�offer�supportservices�to�start-up�businesses.�The�WaterCooler�has�room�for�eight�small�businesses,�additional�cubicle�space�for�more�than�15�people,and�space�for�training�and�meetings3.�
State/ city specific incentives for IT-BPO over and above country level incentives, if any6
•�Businesses�that�invest�a�minimum�of�USD�500,000�in�new�facilities�and�create�at�least�10�new�jobs�averaging�USD�40,000�annually,�plusbenefits,�may�qualify�for�a�variety�of�incentives.�Qualifying�companies�receive:
-�An�enhanced�Investment�Tax�Credit�of�3.75�percent�up�to�USD�750,000�or�62.5�percent�of�tax�liability�in�any�1�year
-�New�jobs�tax�credit�starting�at�USD�1,500�and�climbing�to�USD�3,000�per�job
-�A�2.5�percent�real�property�improvement�tax�credit�up�to�USD�125,000�in�any�1�year�along�with�a�25�percent�rebate�on�sales�taxpaid�on�construction�materials�for�the�new�facilities
-�Upon�request�from�the�company,�the�respective�county�commissioners�may�also�authorize�a�full�or�partial�property�tax�exemption.
Quality of life
•�Cost of living: The�2008�cost�of�living�index�in�Boise�is�89.0,�which�is�less�than�the�US�average�taken�at�1001
•�Crime rate: According�to�FBI�statistics,�Idaho’s�crime�rate�is�the�lowest�in�the�West.�The�rate�of�serious�crime�is�21.3�percent�less�thanthe�national�average7�
•�Pollution levels: Pollution�levels�can�be�high.�Being�a�valley�city,�Boise�faces�a�problem�of�winter�inversion,�which�leads�to�pollution�andsmog�being�trapped�close�to�the�ground�
•�Ease of commuting: ValleyRide�provides�regional�public�transport�and�fixed-line�bus�service�in�Boise.�City�taxis,�which�can�also�bebooked�online,�are�available�in�Boise�for�local�commuting.�Average�commuting�time�is�about�18�minutes6
• Availability of Hotels: There�are�several�hotels,�including�international�hotel�chains,�and�motels�available�in�Boise.
Risk: City specific
•�Catastrophic risks: The�city�of�Boise�is�exposed�to�wildfire8 risks�as�it�is�located�close�to�the�Boise�National�Forest
•�History of disruptions: In�August�2008,�a�wildfire�destroyed�10�houses�and�damaged�nine�others�in�Southeast�Boise9.
1 http://www.city-data.com/city/Boise-City-Idaho.html
2 Kiplinger Personal Finance magazine http://www.estech.org/?pageName=Why
3 Idaho Statesman article
4 Office Market Trends Boise – Grubb and Ellis Research 2008
5 Red Orbit news articlehttp://www.redorbit.com/news/technology/76995/time_warner_telecom_improves_city_of_boise_voice_and_data/index.html
6 Starting A Business In Idaho Publication 2007 - 2008 by Idaho Department of Commerce C.L."Butch" Otter, Governor
7 Visit Idaho website http://www.visitidaho.org/about/relocation.aspx
8 The term “wildfire” is used for uncontrolled fire that destroys forests and many other types of
vegetation, as well as animal species
9 Fox News article (25 August 2008)40
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Indianapolis
Quick facts
GeographicLocation
Situated in east-central US, it can be reached from NewYork by air in about 2 hours and 30 minutes
Time Zone GMT -0500
Climate
Temperate weather, with no pronounced dry or wet season.Summers are warm, while winters are frigid and humid.The average temperature is 11.3 degrees Celsius, whileaverage annual rainfall is 101.6 cm
Population1 797,268
Literacy rate2 99 percent
Languages English
Major industriesFood and allied products, chemicals, electronics, medicaland optical goods
1 Indianapolis University http://www.uindy.edu/aboutuindy/indylinks.php
2 KPMG “Competitive Alternatives 2008” study
3 Cybercities 2008: An Overview of the High-Technology Industry in the Nation's Top 60 Cities
4 Indy Partnership presentation, 2007 (The Indianapolis region is a 10-county area including
Boone, Hamilton, Hancock, Hendricks, Johnson, Madison, Marion, Monroe, Morgan and
Shelby counties)
Sources: 1 FBI 2007 2 CIA data for the country (data not available at the state or city level)
Key drivers for the city to emerge as a favorable IT-BPOdestination
• A number of reputed universities located around Indianapolis offercourses in information technology, creating a ready talent pool forthe IT-BPO industry
• The city offers a variety of incentives to the IT-BPO industry. In a2008 study, KPMG has ranked it the city with the third most costeffective tax structure2
• Indianapolis is located most centrally among the top 100 marketsin the US3, giving it access to talent from other cities
• Indianapolis offers well developed infrastructure including power,telecom, roads and a good quality of life for its residents
• The city is suited to leverage the outsourcing potential in the lifesciences industry, due to presence of a large number of lifesciences companies in the region
• Companies locating in Indianapolis have the benefit of onshoreoperations combined with lower costs compared with other ITcenters in the US, especially the Silicon Valley area.
City Introduction
•�Indianapolis�is�the�capital�of�the�state�of�Indiana,�and�the�twelth�largest�city�inthe�US1
•�The�city�has�a�strong�reputation�in�sports�activities,�and�has�hosted�severalinternational�sporting�events.�
Key IT-BPO companies (Services offered)
Software EngineeringProfessionals, Inc. (ITservices)
Interactive Intelligence(ICT services)
Exact Target (IT services) HP (IT services)
Defender Direct (ITservices)
Tata ConsultancyServices (IT services)
Source: Indy Partnership website
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�The�technology�industry�in�Indianapolis�has�witnessed�sustained�growth�over�the�lastfour�to�five�years,�and�has�seen�positive�job�creation
•�The�average�"technology"�worker�in�the�city�earns�approximately�54�percent�more�salarythan�the�average�private�sector�worker4
•�Indianapolis�is�a�hub�of�entrepreneurial�activity,�with�a�large�number�of�small�andmedium�sized�ICT�companies�located�in�the�region.
Industry Profile – Size and Specifics
•�There�are�about�2000�information�technology�firms�in�the�Indianapolis�region4
•�Around�28,500�people�are�employed�in�the�high-tech�industry�in�Indianapolis4
•�Computer�systems�design�and�related�services�was�the�largest�high-tech�industrysector�in�2006,�followed�by�telecommunications�services
•�Indianapolis�is�predominantly�focused�on�ICT�and�technology�related�services,�withrelatively�lower�traction�in�BPO�services.
41
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Large�and�renowned�universities�like�the�Indiana�University,�Purdue�University,�Rose�Hulman�Institute�of�Technology,�Ivy�Tech�CommunityCollege�and�the�University�of�Illinois�are�situated�near�Indianapolis.�Most�of�these�universities�have�courses�for�computer�studies�andinformation�technology
•�More�than�1,350�students�graduate�in�IT-related�courses�every�year�from�institutions�in�and�around�the�city1�
•�Additionally,�the�Indianapolis�region�was�estimated�to�have�around�63,900�underemployed�workers�in�2007,�22�percent�of�whom�hadinformation�technology�skills2.
Infrastructure
•�Office space (IT Parks): The�office�market�in�Indianapolis�saw�vacancy�rates�of�16.2�percent�in�the�central�business�district�(CBD)�andsubmarket�areas3.�The�average�office�rental�rates�for�non-CBD�areas�are�among�the�lowest�within�states�in�the�US.�The�city�currentlyhas�five�certified�tech�parks,�including�the�Indianapolis�Life�Sciences�Research�Community�and�Indiana�Business�Incubators
•�Power supply: Power�supply�is�reliable�and�costs�about�USD�0.06�per�kWh1
• Telecom Infrastructure: One�of�the�country's�eight�major�fiber�optic�cable�spines�–�Internet�2�-�runs�through�the�Region�and�is�hosted�bythe�Indiana�and�Purdue�Universities
•�National and International connectivity: Four�interstate�highways�converge�in�Indianapolis.�An�upgrade�to�the�Indianapolis�InternationalAirport�was�completed�in�November�2008�at�a�cost�of�USD�1�billion4
•�Upcoming projects: The�Purdue�Technology�Center,�expected�to�open�in�fall�2008,�is�being�built�on�16�hectares�of�land.�The�PurdueResearch�Park,�created�in�partnership�with�Holladay�Properties,�Inc.�is�being�built�on�a�31-hectare�site5.
State/ city specific incentives for IT-BPO over and above country level incentives, if any6
•�In�2003,�the�Indiana�state�brought�in�several�tax�changes,�including�the�phase-out�of�the�inventory�tax,�elimination�of�gross�income�taxand�increased�research�tax�credits.�Permissions�for�businesses�in�the�State�can�be�obtained�online�
•�Several�incentives�can�be�availed�subject�to�certain�key�criteria�/�requirements�being�fulfilled.�The�incentives�include:
-�Phase�in�of�real�property�tax�obligation�over�one�to�ten�year�period
-�Credit�available�to�a�business�engaged�in�making�qualified�media�productions�in�Indiana
-�Refundable�tax�credits�based�on�existing�and�additional�payroll�for�jobs�retained�and�created�in�Indiana.
Quality of life
•�Cost of living: The�cost�of�living�in�Indianapolis�is�lower�than�the�national�average,�especially�on�parameters�such�as�cost�of�groceries,utilities�and�healthcare7
•�Crime rate: Crime�rate�is�quite�high,�with�12�incidents�of�violent�crime�for�every�1000�people8.�Incidences�of�crime�against�propertywere�much�higher,�at�63�for�every�1000�people�in�2007�in�the�city8
•�Pollution levels: Air�pollution�is�high.�Air�Quality�Index�(percentage�of�days�when�air�quality�was�ranked�as�good)�was�58.1�percent�inIndianapolis9
•�Ease of commuting: There�are�no�major�congestion�issues�in�the�city.�However,�the�city�lacks�a�mass�rapid�transport�system.�A�four-railsystem�for�the�city�has�been�proposed
•�Availability of Hotels: Indianapolis�has�budget�as�well�as�luxury�hotels,�including�international�chains.�The�Intercontinental�Group�openedits�121-room�hotel�in�October�2008.
Risk: City specific
•�Catastrophic risks: Indianapolis�is�prone�to�floods�and�tornadoes.�The�city�participates�in�the�National�Flood�Insurance�Program�underwhich�floodplain�management�practices�are�implemented,�and�property�owners�are�able�to�insure�against�flood�losses10
•�Political risks: There�has�been�stability�during�the�last�decade�with�the�ruling�party�completing�its�term�in�power
•�History of disruptions: The�city�has�had�a�history�of�disruptions�on�account�of�flood�and�tornadoes.�However�the�civic�administrationhas�a�disaster�management�program�in�place�to�tackle�these�disruptions.�
1 Indy Partnership presentation, 2007
2 The Indianapolis, Indiana Area Labor Availability Report, September 2007
3 Colliers Turley Martin Tucker and Cushman Wakefield Alliance 2Q 2008
4 Midwest Construction http://midwest.construction.com/features/archive/BestOf2008_35.asp
5 NewsAndTribune website:http://www.newsandtribune.com/local/local_story_066122747.html
6 Indiana Economic Development Corporation
7 ACCRA, 2007 Annual Average Data on Cost of Living
8 FBI Crime Rate Index 2007
9 Best Places to Retire 2007:http://money.cnn.com/magazines/moneymag/bpretire/2007/snapshots/PL1836003.html
10 US Department of Homeland Securityhttp://www.fema.gov/news/newsrelease.fema?id=46811 42
Asia Pacific
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Asia�Pacific�(ASPAC)�is�one�of�the�most�dynamic�and�fastest�growingregions�in�the�world.�Due�to�its�diversity,�it�defies�almost�any�kind�ofstereotypes�and�comparisons.��
The�rise�of�the�ASPAC�region�as�a�services�sourcing�destination�is�led�bythe�Indian�success�story.�Over�the�last�few�years,�other�Asian�locationssuch�as�China,�Australia,�Malaysia,�Sri�Lanka,�Vietnam�and�the�Philippineshave�been�leveraging�the�relative�cost�advantage�to�attract�customers�andhave�managed�to�gain�the�spotlight�on�the�global�IT-BPO�map.�
Realizing�the�growth�potential�of�the�IT-BPO�industry,�Tier�II�cities�in�theASPAC�region�have�now�jumped�on�the�sourcing�bandwagon�and�are�beingprojected�as�specialist�destinations,�and�the�service�providers�aredeveloping�capabilities�in�various�services.�Over�and�above�the�incentivesoffered�by�the�central�government�of�the�countries,�provincial�governmentshave�also�started�providing�incentives�to�companies�that�wish�to�set�upoperations�in�their�administration.�
Besides�offering�lower�costs,�good�talent�pool,�and�better�quality�of�life,�TierII�cities�in�the�ASPAC�region�can�also�offer�scalability.�Most�of�the�ASPACcountries�have�a�young�population,�and�therefore�the�working�age�ratios�arerelatively�high.���
Although�parts�of�the�ASPAC�region�largely�cater�to�the�English�speakingmarket,�cities�in�China�such�as�Changsha�have�Korean�and�Japaneselinguistic�capabilities,�and�cities�such�as�Ahmedabad�serve�a�large�Indiandomestic�market.�
Most�of�the�Tier�II�cities�in�the�ASPAC�region�have�the�benefit�of�learningfrom�the�success�stories�of�the�large�cities�in�their�respective�geographiesand�have�the�potential�to�emulate�this�success.
45
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Brisbane 49
Ahmedabad 59Jaipur 61Nagpur 63
Penang 67
Davao City 71Iloilo City 73
Ho Chi Minh City 77
Changsha 53Hangzhou 55
ASPAC - Table of Contents
46
Australia
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Australia�is�a�constitutional�monarchy,�with�the�Governer-general�acting�as�therepresentative�of�the�British�crown.�The�legislature�consists�of�a�federal�parliamentcomprising�a�76-member�Senate�(upper�house)�and�a�150-member�House�ofRepresentatives�(lower�house).�Each�of�the�six�states�in�the�federation�has�its�owngovernment,�with�a�governor�and�a�bicameral�legislature,�apart�from�Queensland,�which�hasa�unicameral�legislature.�Currently,�the�Labor�Party�has�a�large�majority�in�the�House�ofRepresentatives.�The�next�federal�election�is�to�take�place�in�2010.�
The�country�is�administratively�divided�into�six�states�and�two�territories,�the�governmentsof�which�may�offer�different�investment�incentives�that�promote�their�economies�andencourage�FDI�in�their�own�right.
Business and Investment ClimateForeign Direct Investment (FDI): FDI�inflows�to�Australia�in�2007�were�USD�31�billion2 upfrom�USD�24�billion�in�20063,�according�to�the�Australian�Bureau�of�Statistics.
GDP growth: According�to�EIU,�the�annual�GDP�growth�is�expected�to�average�2.2�percentin�2009-10,�down�from�an�average�of�3.3�percent�in�2003-07.
Inflation: Inflation�rate�was�3.6�percent�in�2007�and�is�expected�to�be�above�the�2-3percent�range�targeted�by�the�Reserve�Bank�of�Australia�(the�central�bank)�in�2008�and20091.
IT-BPO Scenario in the countryAustralia�is�one�of�the�important�destinations�for�Information�and�CommunicationTechnology�(ICT)�services�in�many�areas,�including�software�development,�systemsintegration�and�wireless�networking,�e-commerce,�smart�cards�and�computer�games.�
In�2005-06,�the�packaged�software�and�computer�services�industry�in�Australia�was�worthUSD�18�billion.�In�August�2006,�there�were�168,000�people�employed�in�the�IT-BPOindustry4.�
The�government�has�a�significant�focus�on�the�ICT�industry�and�has�committed�USD�380million�over�10�years�(to�2011)�to�establish�and�operate�a�centre�of�excellence�for�ICTresearch�(National�ICT�Australia�or�NICTA),�research�training�and�commercialization.
Government incentives The�Research�and�Development�Tax�Concession,�administered�by�AusIndustry�(division�ofthe�Department�of�Innovation,�industry,�science�and�research�of�the�Australian�government),allows�companies�to�deduct�up�to�125�percent,�and�in�certain�circumstances�up�to�175percent5,�of�qualifying�expenditure�incurred�on�Research�and�Development�activities.Certain�ICT�companies�that�are�not�yet�making�profit�have�the�option�of�taking�the�taxconcession�as�a�tax�offset,�which�can�provide�cash�to�fund�their�Research�and�Developmentactivities.
Australia
Size of the country 7,682,400 sq. kms.
Population 20.4 million (2007)
Capital Canberra
Currency Australian Dollar (AUD)
1 USD = AUD (Average) 1.20 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 762 billion (2007 est.)
• GDP per capita in PPP: USD 37,234 (2007 est.)
• CPI: 4.5 percent (2007 est.)
• Unemployment rate:4.4 percent (2007 est.)
• FDI stock per capita: USD 14,036 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BBB/ Negative
Standard & Poor’s ForeignCurrency Risk Rating
AAA/Stable/A-1+
Ease of Doing Business Rank(2009)
9
Rigidity of Employment Index(2009)
3
Country Snapshot
1 www.eiu.com, various pages, December 20082 www.fdimagazine.com/news/fullstory.php/aid/2153/Australia_FDI_inflow_doubles.html, FDI Magazine, 20073 www.business.nsw.gov.au, Department of State and Regional Development website, December 2008
4 www.austrade.gov.au, December 20085 www.ausindustry.gov.au, December 2008
Sources: www.eiu.com, www.cia.gov, Gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Brisbane
SydneyCanberra
Melbourne
Adelaide
48
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Brisbane
Quick facts
GeographicLocation
Situated on the east coast of Australia, it can be reachedby air from Sydney in about one hour
Time Zone GMT + 1000
Climate
Sub-tropical climate with hot summers and clear mildwinters. The average summer temperature is 24.8 degreesCelsius, while winter average is 15.6. The average annualrainfall is 115.2 cm
Population1 1,857,594
Literacy rate2 52.6 percent**
Languages English, Chinese, Italian
Major industriesTourism, Oil Refining, Mining, Financial Services,Construction, Health
1 Population statistics, Queensland Government, 20062 www.brisbane.qld.gov.au, December 20083 www.investbrisbane.com.au/Sectors/ICT.aspx, December 20084 BrisbaneMarketing.com, various pages, December 2008
5 Government of Queensland, Working in ICT in the Queensland Government, the Smart State,20076 Australian Census 2006
Sources: 1 Australian Bureau of Statistics (2007)2 2006 Australian Census** Persons aged 15 years and over with a qualification
Other sources: Population statistics: Queensland Govt, Office of Economic and StatisticalResearch, 2007; Invest Brisbane website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Brisbane has a large talent pool, with a higher proportion ofgraduates than the national average. It attracted over 40,000international students in 20062
• The city is home to renowned universities known for their qualityof education and research and development
• Brisbane is recognized for its engineering talent and has a highernumber of ICT graduates per capita than any other Australianstate3
• More than 16 percent of households speak a language other thanEnglish4, thus providing a multi-lingual workforce
• The Queensland Government promotes the growth of the ICTindustry through its “Smart ICT Strategy” that extends support tothe ICT industry for raising capital, export enhancement, researchand development, and business development5
• Brisbane offers cost advantages over cities like Melbourne andSydney in Australia, with 10-15 percent lower employee costs onan average6.
City Introduction
•�Brisbane�is�the�capital�city�of�Queensland�and�Australia's�third�largest�city,�afterMelbourne�and�Sydney1
•�It�is�a�popular�business�and�tourist�center.
Key IT-BPO companies (Services offered)
Oracle (Softwaredevelopment services)
IBM (BPO services)
Red Hat (Engineering andsupport services)
Microsoft (IT services)
HCL TechnologiesApplication Development &Maintenance services(ADM)
Technology One (ITservices)
Sources: Company websites of IBM, Microsoft, HCL,Technology One, IT News Australia
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�The�Information�and�Communications�Technology�(ICT)�industry�is�a�key�growth�sectorwithin�Queensland’s�economy
•�Brisbane�is�gaining�recognition�as�a�hub�for�gaming�development�in�Australia
•�Lower�costs�within�Australia�and�access�to�creative�talent�has�attracted�leading�gamingcompanies�such�as�Sony,�Electronic�Arts,�Nintendo�and�Microsoft�to�Brisbane3.
Industry Profile – Size and Specifics
•�The�ICT�revenue�of�Brisbane�was�USD�23.6�billion�in�2007.�There�were�close�to�5,600companies�employing�77,300�employees3.�The�IT-BPO�industry�is�a�key�component�ofBrisbane’s�ICT�industry
•�The�ICT�industry�is�fragmented,�with�medium�and�large�ICT�businesses�accounting�for�asignificant�proportion�of�employment�and�sales,�co-existing�with�a�large�number�ofmicro�and�small�businesses
•�The�prominent�IT-BPO�services�sourced�from�Brisbane�include�software�development,customer�care,�engineering�services,�game�development�and�e-security�services
•�The�city�also�caters�to�the�domestic�market�for�software�development,�especially�forthe�mining�industry�in�Australia.
49
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.investbrisbane.com/Sectors/CreativeIndustries.aspx, December 20082 www.investqueensland.com.au/dsdweb/v3/guis/templates/content/gui_cue_menu_iq.cfm? id=30223, December 20083 BrisbaneMarketing.com website, various pages, December 2008
4 www.investqueensland.com.au/dsdweb/v3/documents/objdirctrled/nonsecure/pdf/33386.pdf, Queensland Investment Incentives Scheme, 20075 www.qut.edu.au/about/lifebris/living.jsp, December 20086 www.brisbane.qld.gov.au/BCC:BASE::pc=PC_2838, December 2008
Human Resources
•�Brisbane�has�a�large�educated�talent�pool�with�nearly�140,000�students�collectively�enrolled�in�Brisbane’s�universities�in�20071.The�city�ishome�to�renowned�universities�like�The�University�of�Queensland,�Queensland�University�of�Technology,�Griffith�University,�BondUniversity�and�TAFE�Network
•�Brisbane�is�recognized�for�its�engineering�talent,�as�local�universities�have�over�18,000�students�enrolled�in�information�technology�andengineering�related�tertiary�studies1.�Brisbane�has�a�larger�number�of�ICT�graduates�per�capita�than�any�other�Australian�state1
•�Attrition�levels�are�relatively�lower�than�those�in�the�larger�cities,�Sydney�and�Melbourne2.
Infrastructure
•�Office space (IT Parks): Brisbane�is�currently�experiencing�tight�vacancy�rates�for�commercial�office�space.�However,�the�addition�ofnearly�600,000�sq.�mts.�of�new�office�space�is�expected�by�20123.�Brisbane’s�rental�costs�in�general�are�lower�than�those�in�many�othercities�in�Australia
•�Power supply: Power�supply�is�abundant�and�reliable�in�Brisbane,�with�no�outages.�Energex�was�the�monopoly�power�supplier�until2007,�when�the�retail�market�for�power�was�opened�up�to�private�competition�to�allow�more�choice�to�retail�consumers
•�Telecom Infrastructure: Brisbane�has�a�network�of�high�capacity�telecom�links�which�provide�telecom�infrastructure�for�businesscenters�located�in�and�around�the�city
•�National and International connectivity: Brisbane�is�strategically�placed�at�the�junction�of�major�national�and�regional�road�networks.Brisbane�also�offers�an�extensive�network�of�domestic�and�international�flights�with�almost�30�airlines�collectively�operating�more�than2,700�domestic�and�international�flights�per�week2.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�The�Queensland�Government’s�Innovation�Program�offers�a�portfolio�of�grants�with�over�USD�3�billion�invested�to�date,�targeted�atinnovative�and�research�oriented�projects2
•�Rebate�of�state�based�taxes�and�duties4:
-�Refunds�of�up�to�100�percent�of�payroll�and�land�taxes�directly�related�to�the�project,�incurred�and�paid�by�the�business�over�theearly�years�of�operation
-�Refunds�in�part�or�in�full�of�Queensland�Stamp�Duty�incurred�and�paid�in�relation�to�the�establishment�of�the�project.
Quality of life
•�Cost of living: Cost�of�living�in�Brisbane�is�relatively�lower�than�in�cities�like�Sydney,�Melbourne�and�Perth5
•�Crime rate: Brisbane�is�considered�to�be�a�relatively�safe�city;�with�low�crime�rates
•�Pollution levels: The�quality�of�air�in�Brisbane�is�generally�good,�and�Australian�National�Air�Quality�standards�are�rarely�exceeded6.�It�isalso�regarded�as�one�of�the�greenest�cities�in�Australia1
•�Ease of commuting: Brisbane�has�an�extensive�public�transport�system�including�suburban�electric�trains,�Brisbane�City�Council�buses,private�coach�companies�and�ferries.�However,�a�large�number�of�commuters�prefer�personal�vehicles.�Traffic�congestion�and�shortage�ofparking�space�are�witnessed�during�peak�business�hours
•�Availability of hotels: Brisbane�has�quality�hotel�infrastructure,�including�international�hotel�chains,�since�tourism�is�a�significant�part�ofthe�city’s�economy.
Risk: City specific
•�Catastrophic risks: Brisbane�is�occasionally�subjected�to�natural�disasters�like�bushfires,�floods�and�severe�storms
•�Political risks: Low�political�risk,�as�the�state�of�Queensland�has�had�a�stable�political�climate�for�the�last�few�years.
50
China
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
China�is�a�socialist�republic�ruled�by�a�single-party,�the�Chinese�Communist�Party�(CCP).There�are�22�provinces,�and�four�municipalities�directly�under�central�government�controland�5�autonomous�regions.�These�elect�local�people's�congresses,�and�are�administered�bypeople's�governments.�Investor�climate�varies�depending�on�the�policies�of�the�localgovernment,�which�usually�offers�its�own�set�of�fiscal�subsidies�and�tax�refunds.
Business and Investment ClimateForeign Direct Investment (FDI): FDI�into�China�touched�USD�82.66�billion�in�20071,�anincrease�of�13.8�percent�over�2006.�Gross�fixed�investment�growth�is�likely�to�be�lower�in2008-12,�partly�owing�to�higher�real�interest�rates1
GDP growth: China's�GDP�grew�11.9�percent�in�2007;�however�according�to�EIU�real�GDPgrowth�may�moderate�to�9.8�percent�in�2008�and�8�percent�in�2009,�largely�owing�to�theweaker�outlook�for�net�exports1
Inflation: China’s�inflation�is�decelerating�after�reaching�an�11-year�high�of�8.8�percent�inFebruary�20081.�EIU�expects�consumer�price�inflation�to�average�6.7�percent�in�2008.Average�inflation�is�likely�to�moderate�to�3.8�percent�in�2009-10,�owing�to�low�food�priceinflation1.
IT-BPO Scenario in the countryIt�is�estimated�that�there�are�at�least�8,000-10,000�firms2 operating�in�the�IT�software�andservices�sector�in�China.�China’s�offshore�outsourcing�revenue�grew�more�than�40�percentin�2007�to�reach�USD�2.3�billion3.
To�develop�China’s�capabilities�as�an�outsourcing�base�for�IT�software�and�services,�theMinistry�of�Commerce�has�implemented�the�‘Thousand-Hundred-Ten�Project’,�with�a�totalfunding�anticipated�to�be�in�excess�of�USD�1�billion4.�The�program�has�a�heavy�emphasis�onproviding�training�and�development�to�its�personnel�for�employment�in�services�outsourcingjobs.�
The�Ministry�has�launched�a�project�to�develop�13�cities�for�services�outsourcing�across�thecountry.�These�cities�are:�Shanghai,�Dalian,�Xi’an,�Shenzhen,�Chengdu,�Beijing,�Tianjin,Nanjing,�Wuhan,�Jinan,�Hangzhou,�Hefei�and�Changsha.�
Government IncentivesThe�Chinese�government�provides�investment�incentives�in�the�form�of�tax�benefits,including�value�added�tax,�customs�and�income�tax�benefits.
In�the�past,�foreign-invested�enterprises�benefited�from�preferential�tax�rates�and�couldobtain�a�rebate�of�40�percent�on�taxes�paid�on�income�if�profits�were�reinvested�in�Chinafor�5�years5.�Where�profits�are�reinvested�in�high�technology�or�export-oriented�enterprises,a�foreign�investor�could�receive�a�full�tax�rebate.����However,�in�March�2007,�the�NationalPeople's�Congress�passed�a�new�Corporate�Income�Tax�Law,�which�eliminated�many�of�thetax�advantages�that�had�been�enjoyed�by�foreign�investors5.
China
Size of the country 9,561,000 sq. kms.
Population 1,330 million (Jul ‘08 est.)
Capital Beijing
Currency Renminbi / Yuan (RMB)
1 USD = RMB (Average) 6.92 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 7,238 billion (2007 est.)
• GDP per capita in PPP: USD 5,480 (2007 est.)
• CPI: 6.7 percent (2007 est.)
• Unemployment rate: 9.2 percent (2007 est.)
• FDI stock per capita: USD 326 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BBB /Stable
Standard & Poor’s ForeignCurrency Risk Rating
A+/Stable/A-1+
Ease of Doing Business Rank(2009)
83
Rigidity of Employment Index(2009)
27
Country Snapshot
1 www.eiu.com, various pages, December 2008 2 NASSCOM December 20083 China Software Industry Association and Chinasourcing Alliance Whitepaper, June 2008
4 www.chnsourcing.com/download/qbswp/China%20Outsource%20Strategy%201000%20100%2010%20Final.pdf, Temasys International Strategy Paper, 20075 US Department of State, 2008
Sources: www.eiu.com, www.cia.gov, Gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
DalianBeijing
Tianjin
Xi’an JinanNanjingHefei
WuhanShanghai
Hangzhou
ShenzhenChangsha
Chengdu
52
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Changsha
Quick facts
GeographicLocation
Situated in South Central China, on the Xianjiang River, itcan be reached by air from Shanghai, Hong Kong andGuangzhou in about two hours
Time Zone GMT +0800
Climate
Moist subtropical monsoon climate with four distinctseasons – spring, summer, autumn and winter. The averagetemperature is 18 degrees Celsius. The annual averagerainfall is 93.6 cm
Population1 6,530,000
Literacy rate2 83.0 percent
Languages Chinese, English
Major industriesEngineering, Automobile, Chinese Traditional and BiologicalMedicine
1 www.china50bizalliance.com/Trips/ChinaSeptember2008/tabid/349/Default.aspx, China 50Business Alliance, 20082 RedNet.cn, Changsha fertile land for budding entrepreneurs, June 20083 www.csinvest.gov.cn/jjcs_fwwb.asp, December 2008
4 KPMG Changsha Investment Environment Study, 20085 China Post, China Marches into Outsourcing, April 20086 info.hktdc.com/alert/cba-e0809d.htm, December 2008
Sources: 1 KPMG Study: Changsha Investment (2007)2 Changsha government (2000)
Other sources: China Travel Service website; Invest Changsha website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Changsha is one of the 13 cities identified by the Chinesegovernment as hubs for services outsourcing in China1
• Companies located in Changsha’s “Hi-Tech Zone” benefit fromvarious incentives and grants offered by the Hunan provincialgovernment
• Changsha produces nearly half of China’s animation and cartoons2,and is poised to become a hub for outsourced animation services
• The city is a key higher education and research base in centralChina for engineering, computer software, electronics andinformation technology
• Changsha has well established training infrastructure with over 30training institutions in the city3
• Changsha offers a comparative cost advantage over the largercities in China. Office rentals in Changsha are a fourth of rentals incities like Shanghai4.
City Introduction
•�Changsha�is�the�capital�of�the�Hunan�province�of�China
•�It�is�a�key�transport�hub,�with�a�diverse�economic�and�industrial�base.
Key IT-BPO companies (Services offered)
Microsoft (Mobileanimation center)
Hunan ShanmaoCartoon (Animationand cartoon productionservices)
IBM (IT services)Intel (Animationcenter)
Chinasoft (ADM services)Perot Systems (BPOservices)
Sources: Perot Systems website, Invest Changsha website
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Several�enterprises�such�as�Microsoft,�IBM�have�entered�Changsha�by�formingstrategic�partnerships�with�local�firms
•�The�Hunan�province�has�set�aside�about�USD�56�million�to�bolster�the�local�animationindustry5
•�The�Changsha�government�helps�companies�target�offshore�outsourcing�markets�suchas�the�US,�Europe,�Japan,�South�Korea�and�Hong�Kong,�and�solicit�domestic�businessin�the�Yangtze�River�Delta�and�Pearl�River�Delta�areas6.
Industry Profile – Size and Specifics
•�The�combined�IT-BPO�exports�of�the�Hunan�province�is�estimated�at�USD�1.65�billion(2007)5
•�The�city�houses�about�700�service�outsourcing�enterprises3
•�Services�offered�out�of�Changsha�include�research�and�development,�IT�services�andanimation
•�There�also�seems�to�be�traction�in�the�healthcare�medical�coding�and�billing�outsourcingsegment,�with�local�companies�trying�to�acquire�these�businesses�from�the�US�andEuropean�markets.
53
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 CSinvest.gov.cn, December 20082 KPMG Changsha Investment Environment Study 20083 Premier BPO Press Release, 17 October 20074 LA Times, China marches into outsourcing, 8 April 20085 www.greatdreams.com.cn/english/body.asp?NewsID=476, Hunan Great Dreams Cartoon Media Limited Company, December 20086 info.hktdc.com, various pages, December 20087 CSinvest.gov.cn, December 20088 Ministry of commerce
9 Changsha Daily, Giant Police keep watch over Changsha's streets, 19 October 200610 Reuters, China's Changsha city plans local emissions trading, 5 August 200811 Hunan government, 2009 Will See Double Deckers Reintroduced in Changsha, 11 October 200812 Environment News Service, China Struck by Fifth Typhoon, 500000 Evacuated, 25 July 200613 ADB’s Hunan Flood Management Sector Project Report, 2006
Human Resources
•�Changsha�has�been�known�for�its�educational�system�and�the�city�boasts�of�having�advanced�educational�facilities1.�The�city�is�home�torenowned�institutes,�such�as�the�National�University�of�Defense�Technology,�Central�South�University,�Hunan�University,�and�HunanNormal�University
•�The�city�has�48�higher�educational�institutions2 with�approximately�108,000�fresh�graduates�annually.�The�availability�of�a�large�talent�poolis�well-suited�for�scale-driven�IT-BPO�operations2
•�The�proficiency�in�English�is�average,�but�the�city�has�a�large�number�of�private�English�language�training�institutes,�to�prepare�people�forservice�outsourcing�jobs�that�require�English�as�a�medium
•�Attrition�levels�are�about�10�percent�in�Tier�II�cities�(such�as�Changsha)�in�central�China,�relatively�lower�than�those�in�other�Tier�I�cities�inChina3
•�Junior�software�engineers�in�the�city�can�be�hired�for�USD�170�to�USD�250�a�month,�which�is�a�third�of�the�rates�in�Tier�I�cities�such�asBeijing�and�Shanghai4.
Infrastructure
•�Office space (IT Parks): The�Changsha�High-tech�Zone�(CHTIDZ)�concentrates�over�70�percent�of�the�software�development,�serviceoutsourcing�enterprises�in�Hunan3.�Changsha’s�Cartoon�City�of�75,000�sq.�mts.�accommodates�companies�involved�in�providingservices�such�as�animation,�digital�technology,�gaming�and�media.5
•�Power supply: Changsha�government�has�been�investing�heavily�to�meet�the�electricity�needs�of�the�city2
•�Telecom Infrastructure: There�are�several�telecommunication�options�in�Changsha�including�fixed�line,�mobile�and�broadband�services2.China�Telecom�is�the�major�corporation�providing�telecom�services�
•�National and International connectivity: The�Huanghua�Airport�of�Changsha�has�over�40�international�and�domestic�air�routes�withdirect�flights�to�Beijing,�Shanghai,�Guangzhou,�Shenzhen,�Hong�Kong,�Bangkok�and�other�cities2
•�Upcoming projects: The�Changsha�government�plans�to�invest�around�USD�352�million�in�building�a�large-scale�national�comics�andgames�industry�base�which�is�scheduled�for�completion�by�20106.
State/ city specific incentives for IT-BPO over and above country level incentives, if any7
•�Service�outsourcing�companies�that�set�up�headquarters�or�regional�headquarters�in�Changsha�are�expected�to�be�awarded�financialsubsidies�on�a�yearly�basis.�Those�with�a�registered�capital�of�over�USD�14.6�million�may�receive�USD�732,000�in�subsidies
•�Companies�setting�up�in�designated�outsourcing�zones�can�enjoy�a�two-year�waiver�of�taxes.�They�can�get�a�subsidy�of�about�USD�700per�employee�for�training�and�hiring
•�“Fortune�500”�or�Chinese�top�100�enterprises�who�conduct�research�or�production�in�industries�such�as�IT�/�communication,�equipmentmanufacturing�and�advanced�materials,�or�set�up�headquarters�or�regional�headquarters�in�CHTIDZ,�are�to�be�given�a�one-off�industrysupport�grant.�The�amount�of�the�grant�is�to�be�USD�70,500�to�141,000�considering�brand�reputation,�investment�scale�and�productionvolume.�
Quality of life
•�Cost of living: Rent�in�high�end�office�buildings�in�downtown�Changsha�is�typically�around�USD�7�per�sq.�mt.�per�month,�almost�a�fourthof�rentals�in�Shanghai.�However,�according�to�the�National�Development�and�Reform�Commission�data,�the�cost�of�new�housing�surged10.1�percent�on�an�average�in�Changsha�in�20078
•�Crime rate: Changsha�is�considered�to�be�safer�than�other�provincial�capitals�in�China9
•�Pollution levels: Pollution�levels�are�currently�quite�high.�To�reduce�pollutants,�the�provincial�government�has�planned�to�launch�anemissions�trading�scheme,�that�fines�the�districts�that�go�over�the�quotas�assigned�for�dust,�carbon�dioxide�and�water�pollution10
•�Ease of commuting: The�means�of�transportation�in�Changsha�mainly�include�public�buses�and�taxis.�From�2009�to�2010,�about�1000coaches�of�European�emission�standard�are�scheduled�to�be�put�into�operation�annually11
•�Availability of Hotels: Changsha�has�eight�five-star�hotels,�including�international�chains�and�several�three�and�four-star�hotels2.
Risk: City specific
•�Catastrophic risks: Changsha�has�witnessed�floods�over�the�years,�which�have�caused�sizable�property�damage.�However,�investmentsmade�by�Hunan�government�along�with�assistance�from�Asia�Development�Bank�are�expected�to�help�mitigate�the�potential�risks�offloods12
•�Political risks: The�political�situation�is�stable�in�Changsha13.
54
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Hangzhou
Quick facts
GeographicLocation
Situated in on the southern wing of the Yangtze RiverDelta. Hangzhou is 90 minutes from Shanghai by rail
Time Zone GMT +0800
Climate
Subtropical monsoon climate with four distinct seasons –spring, summer, autumn and winter. The averagetemperature is 16.5 degrees Celsius. The annual averagerainfall is 145 cm
Population1 6,700,000
Literacy rate2 91.9 percent
Languages Chinese, English
Major industriesTextiles, Electronics, Telecommunications, High-tech,Chemicals, Medicine
1 www.china50bizalliance.com/Trips/ChinaSeptember2008/tabid/349/Default.aspx, China 50 Business Alliance, 20082 tradeinservices.mofcom.gov.cn/en/i/2008-08-19/53759.shtml, China Trade in Services, August 20083 Shanghai Daily, Hangzhou continues to develop as key outsourcing hub in East China, 17 October 2008
Sources: 1 Beijing 2008 website2 Hangzhou government statistics (2000)
Other sources: China Travel Services, China Highlights website; China Today website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Hangzhou is among the 13 cities identified by the Chinesegovernment as hubs for service outsourcing in China1
• About 18,000 students graduate annually in IT-related courses fromeducational institutions in Hangzhou2
• The city aims to become a hub for financial services outsourcing.Financial services contributed about 43 percent of Hangzhou'soffshore service outsourcing contract value in the first 3 quartersof 20082
• Hangzhou is an established industrial base, and had foreign tradeamounting to USD 43.4 billion in 20073
• The administration of Hangzhou has invested in steadyinfrastructure improvements over the last few years
• Hangzhou provides a lower cost alternative with affordable talent,despite being located very close to Shanghai.
City Introduction
•�Hangzhou�is�the�capital�of�the�Zhejiang�Province
•�It�is�an�important�transport�hub�in�South�Central�China,�known�nationally�for�itshistorical�and�cultural�traditions.
Key IT-BPO companies (Services offered)
Trapeze (Research anddevelopment services)
TCS (ADM services)
Netease (IT productdevelopment)
Infosys (ADM services)
Symbio Group (ITservices)
Sunyard SystemEngineering (IT services)
Sources: Company websites of Infosys, TCS, Reuters article,China Tech News
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�The�electronics�and�information�industry�has�been�developing�rapidly�in�Hangzhou�sincethe�1990s
•�Software�exports�in�Hangzhou�have�increased�53.6�percent�annually�over�the�past�6years�since�20012
•�By�2006,�Hangzhou�was�the�fourth�largest�software�development�centre�in�terms�ofsales�revenue,�after�Beijing,�Shenzhen�and�Shanghai
•�Hangzhou’s�service�outsourcing�industry,�known�for�product�innovation�and�research,has�attracted�multinational�corporations�to�set�up�research�and�development�centers�inthe�city.
Industry Profile – Size and Specifics
•�About�130,000�employees�work�in�the�software�and�information�industries�inHangzhou3
•�Of�those�employed,�43.9�percent�are�involved�in�research�and�development3
•�The�combined�IT-BPO�exports�of�the�city�are�estimated�at�USD�261�million�in�20062�
•�Hangzhou�Statistics�Bureau�shows�that�by�the�end�of�2007,�1201�software�enterpriseshad�been�recognized�by�the�Hangzhou�local�government.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.chnsourcing.com/article/hangzhou/index.asp, China Sourcing: Charming Hangzhou,December 20082 www.zhejiang-trading.com/news/newsview.aspx?id=33, December 20083 info.hktdc.com, various pages, December 20084 China Daily, Press Release, 5 July 20075 www.capitaland.com/en/files/CLNewsRel16July08.pdf, CapitaLand, 16 July 2008
6 Mercer, Annual Cost of Living Index 2008 (Beijing and Shanghai are ranked at 20 and 24respectively in this study)7 KPMG's Hangzhou Investment Environment Study 20078 www.chinatravelguide.com/ctgwiki/2008_China_Snowstorm, ChinaTravel Guide article, 20089 Benfield Hazard Research Center - Earthquakes and a brave new China, 2008* Using the following currency conversion 1 RMB = USD 0.146
Human Resources
•�The�city�is�home�to�36�higher�education�schools,�including�the�Zhejiang�University,�Zhejiang�University�of�Technology�and�ZhejiangNormal�University1
•�In�2007,�there�were�392,800�students�learning�in�higher-education�schools,�26,600�of�which�were�postgraduate�students1�
•�Over�10,000�trained�IT-BPO�professionals�pass�out�of�training�institutes�each�year1
•�Proficiency�in�the�English�language�among�students�is�currently�low.�Hangzhou�has�several�English�language�training�institutes�forstudents�and�professionals.
Infrastructure
•�Office space (IT Parks): Approved�by�the�State�council�to�be�a�National�Hi-tech�zone,�Hangzhou�High-tech�Industry�Development�Zonecovers�a�planned�area�of�85.6�sq.�kms.2
•�Power supply: Electric�power�installed�capacity�in�Hangzhou�is�2.27�million�KW2.�The�city’s�rapid�growth�is�straining�on�its�power�supply,however,�new�generating�capacity�is�now�being�built�to�meet�the�demand
•�Telecom Infrastructure: Hangzhou�has�well�developed�telecommunication�infrastructure,�including�high-speed�Internet�services
•�National and International connectivity: Hangzhou�Xiaoshan�International�Airport�is�the�eighth�largest�in�China,�operating�177international�and�domestic�destinations,�including�Hong�Kong,�Beijing,�Chengdu,�Xian,�Guangzhou,�Tokyo,�Osaka,�Seoul,�Macau,�Bangkokand�Singapore3
•�Upcoming projects: Ascendas,�an�Asian�business�property�developer,�in�partnership�with�Hangzhou�Economic�Development�Area(HEDA)�plans�to�build�a�430,000�sq.�mts.�IT�park,�which�is�expected�to�be�completed�between�2012�–�20154.�Capitaland�also�intends�tobuild�a�Raffles�City�in�Hangzhou�over�a�40,355�sq.�mts.�site,�which�is�expected�to�be�complete�by�20115.
State / city specific incentives for IT-BPO over and above country level incentives, if any3
•�The�Hangzhou�government�gives�continuous�policy�support�to�promote�the�development�of�outsourcing�industry.�These�policies�coveraspects�such�as�specialized�funds,�enterprise�authentication,�market�exploration,�talent�training,�export�and�property�rights�protection
•�Preferential�treatment�is�granted�to�software�enterprises�in�the�High-tech�Zone�in�Hangzhou.�This�includes�support�for�start-ups,development�of�large�and�medium-sized�enterprises,�encouragement�to�independent�innovation�and�strengthening�of�cooperation�withresearch�institutes�through�establishing�special�funds;�and�rewards�for�enterprises�that�get�listed,�win�famous�brand�certificates�or�passCMM�/�CMMI�certification
•�Software�exported�through�custom�clearance�is�to�receive�subsidies�from�USD�7,300�to�USD�14,650�based�on�the�foreign�reserves�aswell�as�the�newly�increased�foreign�reserves�earned�from�the�export�in�that�year.
Quality of life
•�Cost of living: Living�costs�in�Hangzhou�are�almost�a�third�of�costs�in�Tier�I�cities�like�Beijing�and�Shanghai,�which�feature�among�themost�expensive�cities�of�the�world6
•�Crime rate: Hangzhou�is�a�relatively�safe�city,�and�incidences�of�violent�crimes�are�relatively�low
•�Pollution levels: Air�pollution�levels�in�Hangzhou�are�relatively�low.�The�Hangzhou�government�is�focusing�on�ways�to�conserve�energyand�water�and�plans�to�make�Hangzhou�an�Eco-friendly�city�by�2015.�From�2003�to�2005,�Hangzhou�was�ranked�as�excellent�in�theprovincial�assessment�of�ecological�development1
•�Ease of commuting: As�a�pivotal�transportation�hub�in�southeast�China,�Hangzhou�boasts�well-developed�transportation�means.�Localtransport�in�the�city�include�buses,�taxis�and�the�waterbus.�Eight�subway�lines�are�being�planned,�with�the�first�line�scheduled�to�becompleted�in�20083
•�Availability of Hotels: Hangzhou�has�9�five-star�hotels�including�international�hotel�chains,�and�over�a�100�four�and�three-star�hotels7.
Risk: City specific
•�Catastrophic risks: In�2008,�Hangzhou�suffered�a�snow�disaster,�which�affected�a�large�portion�of�central�and�south�China.�This�was�theworst�winter�storm�in�five�decades8.�The�city�lies�in�a�seismic�zone�of�medium�activity
•�Political risks: Hangzhou’s�political�environment�is�stable9.
56
India
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
India�follows�the�Parliamentary�structure,�comprising�the�Lok�Sabha�(Lower�House)containing�people’s�elected�representatives�and�the�Rajya�Sabha�(Upper�House).�The�IndianNational�Congress�and�Bharatiya�Janata�Party�(BJP)�are�the�larger�political�parties.�Thecurrent�ruling�government�at�the�Center�is�a�coalition�between�the�Indian�National�Congressand�several�other�smaller�political�parties.�Elections�are�held�every�5�years,�with�the�nextelection�due�in�2009.�There�are�29�States�within�India�with�their�own�elected�governments.Investor�climate�varies�depending�on�the�policies�of�the�State�government,�in�addition�tothose�of�the�Central�government.
Business and Investment ClimateForeign Direct Investment (FDI): FDI�inflows�into�India�crossed�USD�25�billion�in�2007-08over�USD�19.5�billion�in�2006-071.
GDP growth: Real�GDP�growth�(on�an�expenditure�basis)�in�India�was�9�percent�in�FY�2007-08.�The�EIU�expects�real�GDP�growth�to�fall�to�about�6.3�percent�in�FY�2008-09�and�6.1percent�in�2009-101.
Inflation: Wholesale�price�inflation�surged�to�a�13-year�high�of�nearly�12�percent�year-on-year�in�July�2008,�primarily�due�to�higher�food,�oil�and�other�commodity�prices1.�The�EIUhas�forecast�that�inflation�is�likely�to�average�9.9�percent�in�2008�and�7�percent�in�2009.
IT-BPO Scenario in the countryIndia�is�a�pioneer�in�the�global�offshoring�industry,�clocking�revenues�of�USD�40.3�billionthrough�exports�in�FY2008,�employing�close�to�2�million�people2.�There�are�close�to�1200�IT-BPO�service�providers,�including�global�vendors�such�as�IBM,�Accenture,�HP,�CSC�and�largeIndian�vendors�such�as�Infosys,�TCS,�Wipro,�Genpact,�WNS�and�EXL�Service.�
Aside�from�Bangalore,�Mumbai,�National�Capital�Region�(NCR),�Chennai,�Pune�andHyderabad,�which�are�now�regarded�as�“emerged�destinations”,�several�smaller�Tier�II�and�IIIIndian�cities�have�the�potential�to�attract�IT-BPO�investments.�
The�Software�Technology�Park�of�India�(STPI)�Scheme,�initiated�in�1991,�offered�fiscal�andother�incentives,�promoted�software�exports�and�lent�a�competitive�edge�to�the�IT�sector.This�scheme�is�expected�to�end�on�March�31,�20103.�India�has�recently�seen�theemergence�of�Special�Economic�Zones�(SEZs)�scheme�that�provides�similar�incentives�toexporting�companies�(not�limited�to�IT-BPO�companies).�IT-BPO�companies�are�expected�tomove�from�the�STPI�scheme�to�the�SEZ�scheme�post�2010.
Government incentives2
The�Indian�government�provides�a�variety�of�incentives�to�IT-BPO�industry,�including�100percent�foreign�equity�participation�in�companies.�As�on�September�2008,�the�incentivesinclude:
•�Income�tax�exemption�up�to�March�31,�2010�to�Export�Oriented�Units�/�SoftwareTechnology�Park�units
•�Customs�duty�exemption�for�import�of�software,�and�on�import�of�hardware�for�100percent�export�oriented�projects
•�Complete�pass-through�mechanism�with�single�point�taxation�for�venture�capital�funds
•�Special�concessions�for�Research�&�Development.
India
Size of the country 3,287,590 sq. kms.
Population 1,147 million (2007)
Capital New Delhi
Currency Indian Rupee (INR)
1 USD = INR (Average) 43.39 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 3,094 billion (2007)
• GDP per capita in PPP: USD 2,784 (2007 est.)
• CPI: 6.4 percent (2007 est.)
• Unemployment rate:7.2 percent (2007 est.)
• FDI stock per capita: USD 86 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB /Stable
Standard & Poor’s ForeignCurrency Risk Rating
BBB-/Stable/A-3
Ease of Doing Business Rank(2009)
122
Rigidity of Employment Index(2009)
30
Country Snapshot
1 www.eiu.com, various pages, December 2008 2 KPMG Analysis, various pages from www.nasscom.in NASSCOM website, December 2008
3 Business Standard, Extension of STPI scheme short-term step, 10 April 2008
Sources: www.eiu.com, www.cia.gov, Gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
NCR
Jaipur
Ahmedabad
NagpurMumbai
Pune Hyderabad
ChennaiBangalore
58
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Ahmedabad
Quick facts
GeographicLocation
Situated in Western India, it can be reached by air fromMumbai in about an hour
Time Zone GMT +0550
Climate
Extreme and dry weather with three seasons – summer,monsoon and winter. The average temperature ranges from23 to 43 degrees Celsius. The average annual rainfall is93.2 cm
Population1 5,808,378
Literacy rate2 79.9 percent
Languages Gujarati, Hindi, English
Major industriesGems and Jewelry, Engineering, Textiles, Chemicals &Petrochemicals, Pharmaceuticals
1 www.ahmedabad.com/history.php, December 20082 www.gujaratglobal.com/nextSub.php?id=1091&cattype=NEWS, December 20083 KPMG CII, Gujarat - Riding the Indian offshoring boom, January 20084 www.gnr.stpi.in/home/stp_units_status.asp, STPI Ghandinagar, December 2008
Sources: 1 Ahmedabad Collectorate September (2008)2 KPMG Analysis (2007)
Other sources: Ahmedabad Collectorate; IIM Ahmedabad website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• The city has a large pool of qualified human resources, especiallywith Finance and Accounts related background. Ahmedabad alsoproduces a large number of Chartered Accountants
• Some of India's finest education institutes are located in andaround Ahmedabad
• The city has relatively lower proficiency in the English languagecompared with that in Tier I cities. However, the government istaking initiatives to address the problem
• The state government is setting-up an International Finance TechCity dedicated to offering services to the financial sector
• The city offers a cost advantage in terms of approximately 30percent lower compensation levels and rentals compared with thepremier IT-BPO destinations like Mumbai, Bangalore and NCR2.
City Introduction
•�Ahmedabad�is�the�largest�city�in�Gujarat�state,�located�30�kms�fromGandhinagar,�which�is�the�capital�of�Gujarat�State1
•�Ahmedabad�is�the�cultural�and�commercial�center�of�Gujarat.
Key IT-BPO companies (Services offered)
TCS (IT services) Patni (IT services)
Mphasis (Call center) Aegis (Call center)
Azure (BPO services) Motif (BPO services)
Sources: Company websites of TCS, Mphasis, Azure, Patni, Aegis and Motif
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Gujarat�started�witnessing�increased�activity�in�IT-BPO�sector�in�the�late�1990s.�Thesector�is�dominated�by�mid�to�small�sized�third�party�companies�and�is�currently�nothome�to�any�large�sized�captive�BPO
•�Ahmedabad-Gandhinagar3 and�Vadodara�are�the�major�hubs�that�account�for�98�percentof�the�state’s�IT-BPO�exports
•�The�city�also�caters�to�the�domestic�Indian�market�for�voice�processes�especially�for�thetelecom�segment.
Industry Profile – Size and Specifics
•�The�combined�IT-BPO�exports�of�Ahmedabad-Gandhinagar�is�estimated�at�USD�82.1million�(2007�–�08)4
•�There�are�more�than�350�outsourcing�companies�operating�in�the�city�of�Ahmedabad4
•�The�prominent�IT-BPO�services�sourced�from�Ahmedabad�include�IT�Services,Customer�Care�and�Finance�&�Accounting.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 KPMG CII, Gujarat - Riding the Indian offshoring boom, January 20082 Cushman & Wakefield, Ahmedabad office space, September 20083 mpra.ub.uni-muenchen.de/9502/, Munich University Library, December 20084 www.trai.gov.in/Default.asp, Telecom Regulatory Authority of India, various pages, December 20085 www.vibrantgujarat.jp/district_profile/pdf/Ahmedabad.pdf, December 20086 giftgujarat.in/about_gift.htm#background, December 2008
7 www.gujaratindia.com/policies/it_policy_2006-2011.pdf, December 20088 KPMG Analysis9 www.gujaratplus.com/news/archives/arc58.html, December 200810 www.indiatogether.org/2005/jul/gov-vadodara.htm, December 200811 The Times of India, Gujarat win will change India politics, 23 December 2007 12 The Times of India, Gujarat communal violence finds mention in UNDP report, 15 July 200413 Hindustan Times, Sixth chargesheet filed in Ahmedabad bomb blasts, 12 January 2009
Human Resources
•�Ahmedabad�has�a�large�talent�pool�with�more�than�173,000�students�enrolled�in�commerce�and�arts�streams�in�2006-07�that�cansupport�the�IT-BPO�industry1.�The�city�is�home�to�renowned�engineering�and�management�institutes,�including�the�Indian�Institute�ofManagement�(IIM)�in�Ahmedabad
•�The�city�produces�a�large�number�of�chartered�accountants.�However,�currently�most�prefer�to�relocate�to�other�larger�cities�to�find�jobsin�the�financial�sector
•�Although�employability�in�Ahmedabad�is�lower�than�that�in�Tier�I�cities,�efforts�are�being�undertaken�to�improve�current�skill-setsespecially�related�to�proficiency�in�English�language
•�Attrition�levels�are�lower�than�those�in�other�Tier�I�and�Tier�II�cities�in�India.�Although�there�is�competition�from�other�industries,�a�largelabor�pool�is�available,�and�hiring�is�currently�not�considered�very�difficult.
Infrastructure
•�Office space (IT Parks): Ahmedabad�has�witnessed�a�supply�addition�of�approximately�27,870�sq.�mts.�in�the�second�quarter�of�20082.Also,�several�satellite�areas�suitable�for�office�space�are�coming�up�in�the�city.�However,�overall,�vacancy�rates�are�low�due�to�highdemand
•�Power supply: The�state�has�been�ranked�second�in�India�in�the�power�sector�performance�rating�report�(2006)�by�CRISIL�and�ICRA3.Power�supply�is�generally�reliable,�with�only�isolated�instances�of�power�failures,�but�the�cost�of�electricity�is�relatively�high�as�comparedto�Tier�I�cities�in�the�country
• Telecom Infrastructure: Ahmedabad�has�a�strong�telecom�backbone,�with�the�state�of�Gujarat�having�the�largest�operational�optical�fibercable�network�in�the�country�of�more�than�69,845�kms4
•�National and International connectivity: Ahmedabad�is�on�the�Golden�Quadrilateral5 map�providing�for�good�inter�city�roadconnectivity.�It�is�also�well�connected�by�air�to�the�rest�of�the�country.�Ahmedabad�international�airport�has�direct�connectivity�to�selectlocations�in�the�Middle-East,�South-east�Asia�and�some�destinations�in�Europe�and�the�US
•�Upcoming projects: Two�IT�Special�Economic�Zones�(SEZs)�have�been�notified�which�are�spread�across�approximately�40�hectares.Gujarat�International�Finance�Tech-City�(GIFT)�is�being�developed�as�a�global�financial�hub�on�approximately�two�hundred�hectares�of�landnear�Gandhinagar,�about�4�kms�away�from�the�international�airport6.�Phase�I�of�GIFT�is�scheduled�for�completion�by�March�20106.
State / city specific incentives for IT-BPO over and above country level incentives, if any7
•�Exemption�from�Electricity�Duty�for�10�years�from�the�date�of�rendering�services.�Also,�IT�and�BPO�units�are�to�be�considered�eligible�forexemption�from�power�cuts,�ensuring�reliable�supply
•�Single�Window�Mechanism�for�various�approvals�under�various�State�Laws�
•�Financial�assistance�at�50�percent�of�fixed�capital�investment�in�land,�buildings�and�infrastructure�facilities�up�to�a�maximum�of�USD560,000�are�available�for�companies�planning�to�set-up�operations�in�IT�parks.�
Quality of life
• Cost of living: Cost�of�living�is�relatively�low�compared�to�Tier�I�cities.�Cost�of�housing�is�40-70�percent�cheaper�as�compared�toMumbai8.�However,�high�economic�growth�in�recent�years�has�led�to�a�rise�in�the�cost�of�living�in�the�city
•�Crime rate: The�city�is�considered�to�be�a�safe�place�with�a�relatively�low�crime�rate
•�Pollution levels: Massive�use�of�Compressed�Natural�Gas�(CNG)�vehicles�has�helped�check�the�pollution�levels�within�the�city
•�Ease of commuting: Ahmedabad�has�good�road�network�resulting�in�lower�traffic
•�Availability of Hotels: There�is�a�healthy�supply�of�quality�hotel�accommodation,�including�international�hotel�chains,�in�Ahmedabadround�the�year.
Risk: City specific
•�Catastrophic risks: Ahmedabad�was�affected�by�the�earthquake�that�struck�the�state�of�Gujarat�in�20019.�The�city�lies�in�Zone�III�ofseismic�activity,�which�is�a�moderate�activity�zone9.�Typically�a�fairly�dry�region,�Ahmedabad�witnessed�floods�owing�to�unprecedentedheavy�rains�in�July�200510
•�Political risks: Political�risk�is�relatively�low�in�the�state�as�there�has�been�a�stable�government�at�the�helm,�with�the�current�governmentre-elected�for�a�second�five-year�term�in�the�2007�state�elections11
•�History of disruptions: The�city�experienced�widespread�communal�violence�in�200212.�Also,�Ahmedabad�witnessed�a�spate�of�17�low-intensity�bomb�blasts�in�July�2008�which�disrupted�normal�life13.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Jaipur
Quick facts
GeographicLocation
Situated in North-western India, it can be reached fromNew Delhi by air in about 30 minutes
Time Zone GMT +0550
Climate
Climate is dry and extreme, with three seasons – summer,monsoon, winter. The minimum and maximum temperaturesvary from 8 to 48 degrees Celsius. The average annualrainfall is 55.6 cm
Population1 2,796,000
Literacy rate1 70.6 percent
Languages Marwari, Hindi, English
Major industriesGems and jewelry, tourism, granite tiles, handloom, brassand marble works, textile, apparel, woolen carpets.
1 www.rajasthan.gov.in/rajgovt/Districtprofile/jaipur.html, December 20082 The National Capital Region (NCR) is the urban agglomeration encompassing New Delhi andits surrounding areas, including portions of neighboring states of Haryana, Uttar Pradesh andRajasthan, and a total area of about 33,578 sq. kms.
3 www.mahindraworldcity.com/Jaipur/, December 20084 Figures received from STPI Jaipur
Sources: 1 Rajasthan Government website(2006)Other sources: Rajasthan government website; Jaipurhub.com
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Jaipur has a large pool of qualified human resources, especiallyengineering graduates, with 64 engineering colleges located in andaround the city1
• Due to its proximity to the National Capital Region (NCR)2,companies are considering Jaipur as a supporting location tocreate a hub-and-spoke model
• The new “Mahindra World City” Special Economic Zone (SEZ) isexpected to add about 3 million sq. mts. of office space for the IT-BPO industry3
• Jaipur offers a significant cost advantage over the NCR as well asother Tier I and II cities in India
• Jaipur was ranked third in World Bank’s “Doing Business in SouthAsia 2007” Report, comparing 12 major Indian cities on acomposite parameter for ease of doing business
• Jaipur’s status as one of the top tourist destinations in India givesit added visibility on the national and international map.
City Introduction
•�Jaipur�is�the�capital�of�the�state�of�Rajasthan�and�the�first�planned�city�of�itstime�in�India
•�It�is�known�as�“Pink�City”�due�to�the�color�of�its�prominent�buildings,�and�isamong�the�most�popular�domestic�and�international�tourist�destinations�inIndia.
Key IT-BPO companies (Services offered)
Infosys (BPO services) Genpact (BPO services)
Pratham Software (ITservices)
Deutsche Bank (Sharedservice center)
Tryst Technologies (IT andBPO services)
Compucom Software(Software development)
Sources: Company websites of Infosys, Tryst, Compucom; EconomicTimes article, Finextra article
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Companies�such�as�Genpact�and�Infosys�BPO�set�up�in�Jaipur�in�2006
•�Companies�in�Jaipur�are�also�servicing�the�growing�domestic�BPO�market�in�India
•�Leading�companies�like�Infosys,�Wipro,�Tech�Mahindra,�Genpact,�Deutsche�Bank�andQH�Talbros�have�purchased�land�at�the�new�“Mahindra�World�City�Special�EconomicZone”�and�are�likely�to�start�operations�in�the�future.
Industry Profile – Size and Specifics
•�The�combined�IT-BPO�exports�of�the�state�of�Rajasthan�were�estimated�to�be�aroundUSD�68�million�in�2006-074.�The�majority�of�exports�from�the�state�are�accounted�forby�Jaipur�
•�There�are�more�than�60�companies�operating�from�Jaipur4
•�The�prominent�IT-BPO�services�sourced�from�Jaipur�include�IT�services,�especiallysoftware�development;�engineering�services,�healthcare�BPO�services�such�as�medicaltranscription�and�knowledge�services.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.rajasthan.gov.in/rajgovt/Districtprofile/jaipur.html, December 20082 www.iitfoundation.org/?p=167, December 20083 www.mahindraworldcity.com/Jaipur/, December 2008
4 www.rajasthantravelguide.com/destination/rajasthan.html, December 20085 asc-india.org/seismi/seis-rajasthan.htm, December 20086 The Times of India, Fourth in state, this blast was most planned, 14 May 2008
Human Resources
•�Jaipur�has�access�to�talent�from�close�to�777�technical�institutions�and�64�engineering�colleges�in�Rajasthan1.�One�of�the�leadinginstitutes�in�India,�Indian�Institute�of�Technology�(IIT)�has�also�received�permission�to�start�a�branch�in�Rajasthan2.�Currently,�the�stategovernment�is�in�the�process�of�finalizing�a�location�for�the�IIT
•�About�20,000�students3 graduate�from�the�engineering�colleges�every�year.�Beside�the�local�talent,�a�large�number�of�experiencedprofessionals�of�Rajasthan-origin�working�in�the�NCR�region�could�also�be�targeted�to�return�to�their�home�state
•�Attrition�levels�are�relatively�lower�than�those�in�Tier�I�and�Tier�II�cities�in�India,�especially�as�compared�with�the�NCR.�
Infrastructure
•�Office space (IT Parks): IT�Parks�and�SEZs�are�coming�up�in�the�city.�Besides,�the�city�still�offers�plenty�of�office�space�in�prime�areas�ataffordable�rates�for�companies�to�set�up�offices
•�Power supply: Rajasthan�is�currently�a�power�deficit�state.�However,�power�projects�to�add�another�3180�MegaWatt�of�power�by�20121
are�under�implementation.�The�state�is�targeting�to�achieve�self-sufficiency�in�power�generation�by�20081
•�Telecom Infrastructure: An�optic�fiber�communication�infrastructure�is�in�place�through-out�the�state
•�National and International connectivity: Jaipur�is�well�connected�by�road,�with�prominent�national�highways�passing�through�the�city.Jaipur�is�connected�by�air�to�most�major�cities�in�the�country�and�has�international�flights�to�Dubai,�Sharjah,�Bangkok�and�Singapore4
•�Upcoming projects: The�Mahindra�World�City,�Jaipur,�a�Special�Economic�Zone�(SEZ)�which�commenced�operations�in�2008�is�spreadover�3�million�sq.�mts.3 and�is�the�largest�exclusive�IT-BPO�focused�SEZ�in�India.
State / city specific incentives for IT-BPO over and above country level incentives, if any1
•�Single�point�of�contact�for�approvals�and�clearances
•�Up�to�60�percent�land�rebate�depending�upon�type�and�size�of�investment�
•�Self�certification�allowed�for�IT�&�BPO�companies�for�several�compliances
•�Simplified�labor�laws�including�exemption�from�provisions�related�to�working�on�declared�holidays,�opening�and�closing�hours,�three-shiftoperations,�and�policies�for�women�workers
•�IT�and�BPO�units�declared�as�Public�Utility�Services�under�the�provisions�of�the�Industrial�Disputes�Act,�1947�
•�Customized�packages�for�investment�beyond�INR�100�million�(roughly�USD�2.1�million).
Quality of life
•�Cost of living:�The�cost�of�living�is�comparatively�lower�than�most�other�cities,�especially�compared�with�the�NCR�region,�with�personnelacquisition�costs�and�rentals�also�much�lower
•�Crime rate: The�crime�rate�is�relatively�low�in�the�city
•�Pollution levels: The�growing�number�of�vehicles�has�been�responsible�for�growing�pollution�over�the�last�two-three�years,�althoughpollution�levels�have�not�been�alarming�as�yet.�Moreover,�the�city’s�dry,�arid�weather�does�not�support�the�dispersal�of�particulate�matter
•�Ease of commuting: Jaipur�witnesses�traffic�jams�during�peak�hours.�A�ring�road�has�been�proposed�to�ease�the�traffic�situation�in�thecity�limits
•�Availability of hotels: Being�a�popular�tourist�destination,�there�are�plenty�of�hotels,�including�international�chains.�However,�room�ratesmay�be�high�and�supply�restrictive�during�the�peak�tourist�season�(October�to�March).
Risk: City specific
•�Catastrophic risks: The�city�faces�low�risk�of�earthquake�as�it�is�situated�in�zone�II�of�seismic�(low�to�moderate)�activity5
•�Political risks: Political�risk�is�low,�with�a�stable�political�and�industrial�relations�climate�over�the�last�few�years
•�History of disruptions: Jaipur�witnessed�serial�bomb�blasts�in�a�terror�attack�in�June�2008,�a�first�for�the�city6.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Nagpur
Quick facts
GeographicLocation
Situated in central India, it can be reached by air fromMumbai in an hour and 30 minutes
Time Zone GMT + 0530
Climate
Extreme weather, with three main seasons – summer,monsoon and winter. The average temperature of the city ismaximum 33 and minimum 23 degrees Celsius. The annualaverage rainfall is 120.5 cm
Population1 2,420,000
Literacy rate1 73.7 percent
Languages Marathi, Hindi, English
Major industries Textiles, Steel, Coal mining, Logistics, Transportation
1 www.nagpurmihan.com, December 20082 http://www.boeing.com/commercial/news/2006/q3/060829a_nr.html, August 20063 http://www.persistentsys.com/Investors/Financial200607/FascinatingJourney/tabid/47/Default.aspx, 2007
4 KPMG Analysis5 Figures obtained from STPI Nagpur
Sources: 1 Nagpur247.com (2007)Other sources: Nagpur city website, Nagpuronline.com
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Nagpur is witnessing significant infrastructure development due tothe “Multi-modal International cargo Hub and Airport at Nagpur”(MIHAN) project
• The MIHAN area is to have among other SEZs, a dedicatedinformation technology park spread over 494 hectares with thenecessary infrastructure for IT-BPO companies1
• Boeing has set up a USD 185 million Maintenance, Repair andOverhaul (MRO) Center2, which is likely to boost investment intothe aerospace and engineering services industry in Nagpur
• Nagpur is an educational hub in central India with its manyengineering and medical colleges
• The city offers significant advantage in terms of lower costscompared with Tier I and II cities in India.
City Introduction
•�Nagpur�is�a�major�industrial,�commercial�and�transportation�hub�in�Maharashtrastate,�and�marks�the�geographical�center�of�India
•�It�is�known�as�“Orange�City”�due�to�the�large�Mandarin�oranges�grown�in�thearea.�
Key IT-BPO companies (Services offered)
Persistent Systems (ADMservices)
Micropro Software (ITservices)
ADCC Infocad (IT andengineering services)
Ascent (BPO services)
Fundworks (IT services) GlobalLogic (IT services)
Sources: Company websites of Persistent, ADCC, Fundworkds,Micropro, Ascent and GlobalLogic
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Nagpur�has�been�a�relatively�late�entrant�on�the�IT-BPO�scene
•�It�is�witnessing�an�economic�boom�following�the�creation�of�the�MIHAN�project,�whichis�ushering�in�huge�investments,�especially�in�the�logistics�and�transportation�sectors�
•�Persistent�Systems,�which�started�operations�in�Nagpur�in�2005�through�anacquisition3,�is�among�the�larger�IT�companies�in�the�city4
•�Leading�IT�firms�are�now�expressing�interest�in�the�city.�Companies�like�GE,�Microsoft,Patni�and�L&T�Infotech�have�purchased�land�for�IT�parks�within�the�SEZs�around�theMIHAN�area.
Industry Profile – Size and Specifics
•�The�combined�IT-BPO�exports�of�the�city�is�estimated�at�USD�25.9�million�(2007-08)5
•�There�are�more�than�90�companies�operating�from�the�city5
•�The�prominent�IT-BPO�services�sourced�from�Nagpur�include�IT�Services,�especiallyembedded�software�engineering�services�and�healthcare�BPO�services�such�asmedical�transcription.�
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.fortunelands.com/about_nagpur.php, December 20082 www.rediff.com/money/2007/mar/17nagpur.htm, The Great Nagpur Boom, March 20073 www.expresscomputeronline.com/20040503/newsanalysis02.shtml, Nagpur: Emerging estination for India IT Inc, May 2004
4 Nagpur: City Development Plan (CDP) and City-Level Reform Agenda, March 20065 National Information Center of Earthquake Engineering, IIT Kanpur
Human Resources
•�Nagpur�is�a�major�educational�hub�in�central�India.�Nagpur�district�has�27�Engineering�Colleges,�11�Medical�Colleges�and�more�than�40graduate�colleges�for�Science�and�Commerce�education1.�The�city�also�attracts�students�from�nearby�cities�like�Jabalpur,�Amravati,Bilaspur�and�Raipur�(within�150�kms�radius)
•�English�language�skills�of�the�workforce�are�currently�average
•�Although�talent�is�largely�available,�experienced�managerial�talent�is�in�relatively�short�supply�as�students�prefer�to�migrate�to�largertowns�around�Nagpur�–�such�as�Mumbai,�Pune�and�Hyderabad.�Companies�are�making�efforts�to�attract�local�talent�to�relocate�toNagpur�and�internally�develop�people�to�handle�managerial�responsibilities
•�Attrition�levels�are�relatively�lower�than�those�in�Tier�I�and�Tier�II�cities�in�India.�
Infrastructure
•�Office space (IT Parks): Nagpur�is�witnessing�a�boom�in�construction�of�commercial�office�space.�Approximately�110,554�sq.�mts.�ofcommercial�office�space�is�expected�to�come�into�the�market�by�20092
•�Power supply: The�city�is�a�hub�for�power�generation�and�there�are�fewer�breakdowns�and�outages�compared�with�other�cities�inMaharashtra�(the�state�has�a�huge�power�deficit).�There�are�separate�sub-stations�for�IT�companies�and�power�for�areas�having�IT-BPOcompanies�is�relatively�more�reliable
•�Telecom Infrastructure: The�Software�Parks�in�Nagpur�offer�international�connectivity�via�satellite�at�costs�comparable�to�those�in�othercities�in�India.�Several�major�national�Internet�Service�Providers�operate�in�the�city
•�National and International connectivity: Nagpur’s�central�location�makes�it�an�important�roadways�and�railway�junction.�Two�majornational�highways�pass�through�the�city.�Internal�roads�had�a�facelift�recently,�when�they�were�developed�as�part�of�the�upgrade�andrenewal�works�under�the�government’s�Integrated�Road�Development�Project
•�Upcoming projects: The�city�currently�has�three�software�parks,�with�another�planned�to�come�up.�Besides,�a�SEZ�has�been�notified�asan�integral�part�of�the�MIHAN.�The�SEZ�is�expected�to�have�dedicated�areas�for�IT�parks,�healthcare,�gems�and�jewelry,�garments�andtextiles,�and�banking�companies.
State/ city specific incentives for IT-BPO over and above country level incentives, if any3
•�Special�capital�incentive�for�companies�in�the�Nagpur�Municipal�Corporation�(NMC)�area�-�30�percent�of�gross�Fixed�Capital�Investment(FCI)�with�a�ceiling�of�USD�50,000.�Refund�of�Octroi�duty�for�100�percent�of�FCI�for�9�years�in�municipal�corporation�limits,�12�years�forother�areas
•�Exemption�from�Electricity�Duty.�Zero�downtime�policy�announced�recently�is�likely�to�be�operational�soon
•�Rebate�on�stamp�duty
•�Charging�of�Sales�Tax�at�a�minimum�floor�rate�of�four�percent�on�all�IT�products�and�non-IT�products�essential�for�IT�and�IT�EnabledServices�Units�as�approved�by�the�Empowered�Committee.
Quality of life
•�Cost of living: The�cost�of�living�is�comparatively�lower�than�most�other�cities,�with�personnel�acquisition�costs�that�much�lower.�Rentalsare�also�lower�than�Tier�I�cities,�but�lately�have�risen�sharply�owing�to�the�MIHAN�cargo�hub�(by�around�40�percent�around�MIHAN�in�thelast�one�year)2
•�Crime rate: Crime�rate�has�remained�constant�in�the�city�over�the�last�few�years
•�Pollution levels: Nagpur�is�one�of�the�greenest�cities�in�India,�with�low�pollution�rates
•�Ease of commuting: Nagpur’s�road�network�has�recently�undergone�a�facelift,�resulting�in�lower�traffic.�The�public�transport�system�isgenerally�inadequate�and�unreliable.�An�integrated�bus�and�monorail�system�has�been�proposed�and�is�expected�to�be�ready�by�2013-144
•�Availability of Hotels: Nagpur�has�very�few�luxury�hotels�and�no�major�international�chains.�Some�large�hotels�have�been�planned�in�theMIHAN�area.�Adequate�standard�accommodation�is�available�through�the�year.
Risk: City specific
•�Catastrophic risks: Nagpur�has�not�seen�any�major�natural�calamities�so�far.�The�city�lies�in�zone�II�of�seismic�activity,�with�the�low�riskof�an�earthquake5
•�Political risks: There�has�been�stability�during�the�last�decade�with�the�ruling�party�completing�its�term�in�power
•�History of disruptions: Nagpur�has�not�been�affected�by�communal�tensions,�rioting�or�terrorism�so�far.�
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Malaysia
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Malaysia�follows�a�federated�constitutional�monarchy.�The�country�is�led�by�a�King�whoappoints�a�Prime�Minister�and�on�his�advice�the�cabinet�is�chosen.�There�are�stategovernments�in�each�of�the�13�states,�in�nine�of�which�the�head�of�state�is�an�hereditaryruler.�Each�state�has�its�own�constitution,�a�council�of�state�or�cabinet�with�executiveauthority,�and�a�legislature�that�deals�with�matters�not�reserved�for�the�federal�parliament.There�are�also�three�federal�territories:�Kuala�Lumpur,�Labuan�and�Putrajaya.�Investorclimate�varies�depending�on�the�policies�of�the�State�government,�in�addition�to�those�ofthe�federal�government.
Business and Investment ClimateForeign Direct Investment (FDI): FDI�inflows�into�Malaysia�grew�from�2.2�percent�in�2003to�4.5�percent�in�20071.
GDP growth: Real�GDP�growth�in�Malaysia�was�6.3�percent�in�2007.�The�EIU�has�revised�theforecast�for�real�GDP�growth�to�3.1�percent�in�2009�from�the�previous�4.6�percent1.
Inflation: Consumer�price�inflation�is�likely�to�be�an�average�5.4�percent�during�2008,�upfrom�2�percent�in�20071.�The�EIU�expects�consumer�price�inflation�to�average�2.4�percent�in2009�(down�from�3.5�percent�predicted�previously).
IT-BPO Scenario in the countryMalaysia�clocked�revenues�of�USD�4.7�billion2 through�exports�in�2007,�employing�close�to365,000�professionals3.�There�are�around�1400�IT-BPO�service�providers4.�
Through�the�Multimedia�Super�Corridor�(MSC)�project,�the�Malaysian�government�isfocusing�on�the�IT-BPO�industry�to�a�large�extent.�The�vision�of�this�project�is�to�convertMalaysia�into�a�knowledge�economy�by�year�20205.��
The�Malaysian�government�is�projecting�the�country�as�a�destination�for�high-end�services,which�are�relatively�less�scale�dependent.
Kuala�Lumpur,�Cyberjaya,�Menara�MSC,�Cyberport,�Johor,�KLCC,�Kulim�High�Tech�Park,Melaka�International�Trade�centre�(MITC),�and�Penang�are�the�IT-BPO�destinations�inMalaysia.�
Government incentivesThe�Malaysian�government�provides�a�variety�of�incentives�to�the�IT-BPO�industry,permitting�100�percent�foreign�equity�participation�in�companies.�Some�of�the�incentivesinclude:
•�Investment�tax�allowance�up�to�100�percent2
•�Corporate�tax�rate�to�be�cut�to�25�percent�by�2009�from�current�level�of�27�percent2
•�Customs�duty�exemption�for�import�of�multimedia�equipment.
Over�the�years�the�Malaysian�government�has�introduced�laws�to�protect�intellectualproperty�of�IT-BPO�companies.�Also,�Cyber�Security,�Malaysia�an�agency�under�Ministry�ofScience,�Technology�&�Innovation�acts�as�a�one�stop�coordination�center�for�nominal�cybersecurity�initiatives.
Malaysia
Size of the country 330,113 sq. kms.
Population 27.2 million (2007)
Capital Kuala Lumpur
Currency Malaysian Ringgit (MYR)
1 USD = MYR (Average) 3.33 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 359.3 billion (2007)
• GDP per capita in PPP: USD 13,210 (2007 est.)
• CPI: 2.0 percent (2007)
• Unemployment rate:3.2 percent (2007 est.)
• FDI stock per capita: USD 3171 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BBB /Negative
Standard & Poor’s ForeignCurrency Risk Rating
A-/Stable/A-2
Ease of Doing Business Rank(2009)
20
Rigidity of Employment Index(2009)
10
Country Snapshot
1 www.eiu.com, various pages, December 2008 2 www.outsourcingmalaysia.org.my, December 20083 Gartner, Analysis of Malaysia as an Offshore Services Location, November 2007
4 ICT in Malaysia, The New Economic Engine of the Nation - MGCC Quarterly Sept/Oct 20075 MSC Malaysia Handbook, 2007
Sources: www.eiu.com, www.cia.gov, Gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Penang
Kuala Lumpur
Melaka
Johor
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Penang
Quick facts
GeographicLocation
Situated by the Strait of Malacca, Penang is a 50 minuteflight away from Kuala Lumpur
Time Zone GMT +0800
Climate
Warm equatorial climate, with no distinct seasons. Theaverage temperature is maximum 31 and minimum 23degrees Celsius. The annual rainfall ranges between 200and 250 cm
Population1 1,469,000
Literacy rate2 88 percent
Languages English, Bahasa Melayu, Chinese, Tamil, Telugu, Malayalam
Major industries Manufacturing, Construction, Logistics, Tourism, Retail
1 InvestPenang.gov.my, December 20082 www.outsourcingmalaysia.org.my, December 2008
Sources: 1 Tourism Penang (2007); 2 Gartner (2007)
Other sources: Tourism Penang website, Penang Development Corporation website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• The Government has a strong focus on promoting the IT-BPOindustry in Penang through initiatives such as Invest Penang,expanding the Multimedia Super Corridor (MSC) to Penang, andcreating the Software Consortium of Penang (SCoPe)
• There is a talent pool of skilled English speaking developers ofmany different nationalities available in Penang, making it suitedfor multi-lingual service delivery
• Although the potential to scale is limited, the talent pool is suitedto offer higher-end, relatively less scale-dependent IT-BPOservices, especially in areas such as financial services, logistics,energy and pharmaceuticals
• Penang is also developing as a hub for outsourcing of Islamicbanking services, especially by banks in the Middle-East2
• Significant investments are planned to upgrade the existinginfrastructure in the city
• Penang has strong engineering and manufacturing base, which canbe leveraged to offer services in these sectors.
City Introduction
•�Penang,�also�referred�to�as�“The�Pearl�of�the�Orient”�lies�off�the�northwesterncoast�of�Peninsular�Malaysia
•�It�is�a�bustling�port,�a�heritage�city�and�an�industrial�base.�
Key IT-BPO companies (Services offered)
IBM (IT services)Ideal Capital (BPOservices)
Intel (Design center)Motorola (Research anddevelopment services)
MoBif (BPO services)Citicorp (Transactionservices)
Sources: Company websites of IBM, Intel, Motorola, Citigroup;Call center directory, The Star article
Current IT-BPO scenario in the city Development of the current IT-BPO industry1
•�Penang�was�the�first�state�in�Malaysia�to�be�officially�granted�the�Cybercity�status�inJanuary�2003
•�One�aspect�of�the�second�phase�of�its�expansion�plan�(2004�–�2010),�included�the�roll-out�of�the�Multimedia�Super�Corridor�(MSC)�in�Penang.�This�has�given�the�softwareindustry�in�the�state�a�significant�boost�
•�Several�companies�have�strengthened�their�presence�in�Penang�through�partnershipswith�local�small�and�medium�enterprises,�thereby�driving�growth�in�the�sector.
Industry Profile – Size and Specifics
•�The�combined�IT-BPO�exports�of�the�city�are�estimated�at�USD�564�million�in�20072
•�In�March�2008,�there�were�146�MSC�status�companies�in�Penang,�of�which�81�were�insoftware�and�shared�services�outsourcing2
•�There�are�about�20,500�professionals�employed�in�the�IT-BPO�sector�in�Penang2
•�Companies�are�predominantly�engaged�in�enterprise�application�services.�However,other�services�such�as�internet�surveillance,�customer�relationship�management,animation�and�e-solutions,�and�pharmaceutical�services�are�also�provided�from�the�city.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Penang�has�33�universities�and�private�colleges,�including�the�Penang�Medical�College�and�the�first�(and�largest)�school�of�pharmacy�inMalaysia�and�University�of�Science�Malaysia�(granted�the�APEX1 status�in�2008)2
•�The�Multimedia�Development�Corporation�has�started�an�internship�program�to�enhance�employability�among�graduates,�which�isrelatively�lower�than�that�in�the�larger�cities
•�Penang�Skills�Development�Centre�is�a�joint�effort�of�industry,�academia�and�government�providing�skill�training�across�all�industries,especially�in�engineering,�technical�and�IT3.�The�center�was�established�in�1998�to�meet�the�human�resource�development�needs�of�theindustry3.�It�has�churned�out�over�100,000�trainees�through�the�years3
•�Attrition�levels�are�approximately�12.5�percent,�which�are�lower�than�attrition�rates�in�Kuala�Lumpur4.
Infrastructure
•�Office space (IT Parks): Penang�has�about�260,000�sq.�mts.�of�office�space�with�an�average�occupancy�rate�of�74�percent5
•�Power supply: Power�is�supplied�to�Penang�by�Tenaga�Nasional�Bhd.�Electricity�supply�has�been�reliable�in�Penang.�Except�for�a�blackoutin�the�island�in�November�2007�after�a�power�trip�at�the�TNB�substation6,�there�has�been�no�major�incidence�of�power�failure�
•�Telecom Infrastructure: Telekom�Malaysia�Berhad�offers�fixed-line,�mobile,�data�and�broadband�services�in�Penang.�Partnering�with�thelocal�government,�Hotgate�Technology�is�rolling�out�a�free�public�WiFi�network�in�Penang�which�is�expected�to�be�complete�byDecember�20097
• National and International connectivity: Penang�Bridge�facilitates�the�link�between�the�island�of�Penang�to�Seberang�Prai�on�theMalay�Peninsula.�Penang�International�Airport�offers�connectivity�with�major�cities�in�South�East�Asia
•�Upcoming projects: A�USD�5�billion�Penang�Global�City�Centre,�launched�this�year,�is�likely�to�be�completed�in�phases�in�15�years.�Theproject�has�applied�for�an�MSC�status�to�attract�ICT�companies6.
State/ city specific incentives for IT-BPO over and above country level incentives, if any1
•�MSC�Malaysia�Cybercity,�Penang�provides�competitive�financial�incentives,�including�no�income�tax�for�up�to�10�years�or�an�investmenttax�allowance,�and�no�duties�on�import�of�multimedia�equipment�for�MSC�Malaysia�Status�Companies
•�A�company�granted�Investment�Tax�Allowance�gets�an�allowance�of�60�percent�of�qualifying�capital�expenditure�incurred�within�5�yearsfrom�the�date�on�which�the�first�qualifying�capital�expenditure�is�incurred.�Companies�can�offset�this�allowance�against�70�percent�oftheir�statutory�income�in�the�year�of�assessment.�Any�unutilized�allowance�can�be�carried�forward�to�subsequent�years�until�fullyutilized.�The�remaining�30�percent�of�statutory�income�is�likely�to�be�taxed�at�the�prevailing�company�tax�rate
•�Companies�that�receive�MSC�status�also�qualify�for�unrestricted�employment�of�foreign�knowledge�workers.
Quality of life
•�Cost of living: The�cost�of�living�is�relatively�lower�than�Kuala�Lumpur�and�Johor�Bahru8.�Georgetown,�Penang�was�rated�the�10th�bestplace�to�live�in�Asia�by�ECA�International�in�2006
•�Crime rate: Penang�has�seen�a�0.9�percent�rise�in�crime�rate�from�2007.�However,�Penang�is�the�leading�state�in�Malaysia�when�itcomes�to�solving�cases,�with�a�rate�of�53.1�percent6
•�Pollution levels: The�Department�of�Environment�imposes�strict�regulations�on�the�companies�in�Penang.�However,�the�city�suffers�fromsmog�and�polluted�rivers
•�Ease of commuting: With�the�launch�of�the�Rapid�Penang�Buses�in�August�2007,�public�transportation�service�in�Penang�has�greatlyimproved,�and�the�intra-city�commute�has�become�easier9
•�Availability of Hotels: Penang�offers�a�wide�range�for�hotels,�including�international�chains,�for�both�leisure�and�business�travelers.
Risk: City specific
•�Catastrophic risks: Penang�Island�was�hit�by�the�tsunami�in�2004,�causing�the�authorities�to�implement�tsunami�warning�measuresalong�the�beaches10.�The�island�has�also�witnessed�a�7.2�magnitude�earthquake�in�February�200811.�Malaysia,�however�lies�in�a�low-seismic�zone,�and�there�is�low�overall�risk�of�earthquakes
•�Political risks: There�is�a�new�government�at�the�helm�in�Penang�after�a�landslide�victory�in�the�2008�elections�defeating�the�incumbentparty�which�led�the�state�since�1969
•�History of disruptions: Penang�has�witnessed�more�than�one�instance�of�communal�riots�between�the�Indians�and�the�Malays.
1 The university that is given the APEX status is one that has the greatest potentialamong Malaysian universities to be world-class, and as such, would be given additionalassistance to compete with top-ranked global institutions2 Penang Economic Report 20073 PSDC Website4 Silterra News5 Penang Property website6 The Star online, Penang: Rising crime, No 1 in crime-busting, September 2008
7 TelecomAsia.net article8 Penangmyhome.com9 Penangwatch.net article10 PHP Lens.com article11 TheStar.com.my article
68
Philippines
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
The�Philippines�has�a�representative�democracy�modeled�on�the�United�States�system.�The1987�constitution,�adopted�during�the�Aquino�administration,�reestablished�a�Presidentialsystem�of�government�with�a�bicameral�legislature�and�an�independent�judiciary.�In�2007,legislative�and�local�elections�were�held.�President�Arroyo's�coalition�won�the�majority�ofthe�seats�in�the�House�of�Representatives,�gubernatorial�seats,�and�city�mayoral�seats.Provinces�are�grouped�into�17�regions�for�administrative�convenience.�Most�governmentoffices�establish�regional�offices�to�serve�the�constituent�provinces.�Investor�climate�variesbased�on�the�incentives�offered�by�individual�provinces,�apart�from�those�offered�by�theCenter.
Business and Investment ClimateForeign Direct Investment (FDI): According�to�the�Central�Bank,�Philippines�should�attractFDI�of�USD�3.2�billion�in�2009,�up�from�an�estimated�USD�2.6�billion�in�20083.
GDP growth: Real�GDP�growth�picked�up�in�2007,�to�an�impressive�7.2�percent.�EIU�hasrevised�the�growth�forecast�for�GDP�in�2009�to�2.3�percent�from�3.9�percent�previously1.
Inflation: In�view�of�the�latest�consumer�price�inflation�data�(9.7�percent�CPI�for�2Q�2008),the�EIU�has�revised�its�inflation�forecast�for�2008�to�9.6�percent,�from�6.2�percentpreviously.�Inflation�is�expected�to�average�6.5�percent�in�20091.
IT-BPO Scenario in the countryPhilippines�clocked�revenues�of�USD�6.7�billion�through�exports�in�FY2008,�employing�closeto�480,000�people4.�Companies�such�as�AOL,�Sykes,�Citibank,�Accenture,�IBM,�AMEX�andCaltex�were�amongst�the�first�to�set�up�base�in�the�Philippines�around�2001-03.
The�main�areas�of�operations�by�companies�operating�in�the�Philippines�are�call�center,�legalservices,�web�design,�medical�transcription,�animation,�finance�and�accounting,�andsoftware�development.
Aside�from�Manila,�emerging�destinations�such�as�Cebu�City,�Baguio�City,�Bacolod�City,Cagayan�de�Oro,�Clark�(Angeles�City),�Dagupan�City,�Davao�City,�Iloilo�City�and�Legazpi�Cityare�several�smaller�Tier�II�and�III�cities�having�the�potential�to�attract�IT-BPO�investments.�
The�Business�Processing�Association�of�the�Philippines�(BPAP)�is�an�umbrella�associationthat�represents�organizations�engaged�in�providing�BPO�services�in�the�Philippines5.
Government incentives6
The�Philippines�government�provides�a�variety�of�incentives�to�IT-BPO�industry,�including�afour�to�eight�year�income�tax�holiday,�other�incentives�include:
•�Tax�and�duty�exemption�on�imported�capital�equipment�(for�IT�park�locators)
•�Deduction�for�labor�and�training�expenses�up�to�150�percent
•�Exemption�from�wharfage�dues.
Size of the country 300,179 sq. kms.
Population 91.1 million (2007)
Capital Manila
Currency Philippines Peso (PHP)
1 USD = PHP (Average) 42.72 (2008)
Main macroeconomic indicators:
• GDP in PPP: USD 299.4 billion (2007 est.)1
• GDP per capita in PPP: USD 3,287 (2007 est.)1
• CPI: 2.8 percent (2007 est.)2
• Unemployment rate:7.3 percent (2007 est.)1
• FDI stock per capita: USD 218.2 (2007 est.)1
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB/ Negative
Standard & Poor’s ForeignCurrency Risk Rating
BB-/Stable/B
Ease of Doing Business Rank(2009)
140
Rigidity of Employment Index(2009)
35
Country Snapshot
1 www.eiu.com, various pages, December 2008; 2 www.census.gov.ph/data/pressrelease/2008/cp0712tx.html, National Statistical Office Philippines, July 20083 Asean Affairs
4 Report by ICT Division, Philippines5 BPAP website6 Philippines Trade and Investment Center
Sources: www.cia.gov, Gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Baguio City
Dagupan City Clark/ Angeles CityManila Legazpi City
Iloilo City
Bacolod CityCebu City
Cagayan de Oro
Davao City
Philippines
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Davao�City
Quick facts
GeographicLocation
Situated in South-eastern Philippines, it can be reached byair from Manila in about 90 minutes
Time Zone GMT + 0800
ClimateVarying temperature, rainfall and humidity through the year.The average temperature is 32 degrees Celsius and averageannual rainfall is up to 200 cm
Population1 1,147,116
Literacy rate1 95.2 percent
Languages Cebuano, Filipino, English
Major industriesTourism, food processing, light manufacturing, woodprocessing
1 www.pia.gov.ph/?m=12&sec=reader&rp=1&fi=p070621.htm&no=2&date=, December 20082 Figures received from BPAP, Philippines
Source: 1 Davao City website (2007)Other sources: Davao city website; Philippines government tourism website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Davao City is the educational hub for Davao province and has alarge number of educational institutions
• Some companies are setting up training centers in the city, whichare also being utilized to train employees from companies’ otheroperating centers in the Philippines
• There talent pool has good English language skills, which coupledwith cultural similarities with the US, is suited to provide voice-based services to the US
• Companies looking at a hub-and-spoke model in the Philippines aresetting up supporting centers to their operations in Manila or CebuCity, in Davao City
• The city offers an advantage by way of lower cost of living,cheaper wage rates and good infrastructure, compared with largercities within the Philippines.
City Introduction
•�Davao�City�is�considered�as�the�financial�center�of�the�Mindanao�Island�in�thePhilippines.�It�is�also�a�popular�tourist�destination
•�In�2002,�it�was�declared�as�an�IT�hub�given�its�potential�to�attract�ICTcompanies1.
Key IT-BPO companies (Services offered)
G-Com Asia Pacific (Callcenter)
Sutherland (Call center)
Link2Support (BPOservices)
Hubport Interactive (ITservices)
Six Eleven GlobalServices (Call center)
Western Wats (Callcenter)
Source: Article on Zambotoday.com
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Davao�City�has�come�up�as�an�attractive�outsourcing�destination�in�the�last�two�to�threeyears
•�Some�of�the�companies�are�working�with�the�Technical�Education�and�SkillsDevelopment�Authority�(TESDA)�in�Davao�City�for�training,�which�includes�a�componenton�call�center�training�for�their�employees.
Industry Profile – Size and Specifics
•�BPO�exports�in�2007-08�from�the�city�were�approximately�USD�60�million2
•�There�were�19�BPO�companies�operating�from�the�city,�with�around�3,500�employed�in2007-082
•�The�prominent�IT-BPO�services�sourced�from�Davao�City�include�call�center,�medicaltranscription,�web�and�graphics�design,�and�engineering�services.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Davao�City�is�an�education�hub�in�Mindanao�province,�having�more�than�40�tertiary�education�institutions�classified�as�universities(including�the�University�of�the�Philippines-Mindanao),�colleges,�and�technical�schools.�Three�of�these�institutions�are�rated�among�thetop�20�institutions�in�the�Philippines1
•�The�city�produces�close�to�16,000�graduates�every�year,�and�attracts�students�from�nearby�areas,�thus�offering�a�large�and�diverse�talentpool1
•�Attrition�is�low,�as�competition�for�qualified�workers�from�other�competing�industries�in�Davao�City�is�limited.
Infrastructure
•�Office space (IT Parks): Davao�City�is�expected�to�have�healthy�addition�of�reasonably�priced�office�space�in�the�next�one�to�two�years.A�large�number�of�dedicated�buildings�and�complexes�to�house�IT-BPO�companies�have�come�up�recently�and�more�are�underconstruction
•�Power supply: Davao�City�has�one�of�the�most�stable�power�supplies�in�the�country.�It�gets�its�power�supply�from�a�hydro-power�plant.The�unit�cost�of�power�supply�is�USD�0.116�per�KWH1,�which�is�among�the�cheapest�in�the�country
•�Telecom Infrastructure: Philippines�Long�Distance�Telecom,�or�PLDT,�(which�was�earlier�a�monopoly�provider)�and�Globe�Telecom�are�thetwo�largest�players.�Some�regional�level�players�also�provide�services�in�Davao�City
•�National and International connectivity: Davao�City�is�well�connected�to�other�major�cities�in�the�Philippines�through�road,�sea�and�air.The�international�airport�was�upgraded�in�2006�and�has�daily�flights�to�Singapore�and�Indonesia2
•�Upcoming projects: Ayala�Land�is�constructing�a�10-hectare�property�called�Abreeza,�likely�to�be�fully�operational�by�2011,�with�anexpected�investment�of�USD�80�to�100�million.�The�BPO�Center�component�of�the�project,�covering�18,000�sq.�mts.,�is�likely�to�be�readyby�20093.�
State/ city specific incentives for IT-BPO over and above country level incentives, if any1
•�Investors�in�IT�and�BPO�operations�are�granted�tax�holidays�on�local�fees�and�charges�and�basic�real�property�tax
•�Fiscal�Incentives:�Exemption�from�payment�of�the�Mayor’s�permit�fees,�building�permit�fees,�business�sales�taxes�and�other�fees�andcharges�imposed�under�existing�city�ordinances�for�a�maximum�of�three�years;�and�exemption�from�payment�of�basic�real�property�taxfor�a�maximum�of�two�years
•�Non-fiscal�Incentives:�Investor’s�Assistance�Services�in�the�form�of�assistance�in:�
Securing�business�licenses�and�permits,�Availing�local�investment�incentives,�Business�matching�services,�Finding�suitable�sites�forbusiness�or�plant�location,�Identifying�possible�sources�of�raw�materials,�manpower�and�other�production�needs�and�Databankingservices.
Quality of life
•�Cost of living: The�cost�of�living�is�lower�than�that�in�Metro�Manila4.�Prices�of�food�items�are�especially�lower
•�Crime rate: Davao�is�a�reasonably�peaceful�city�with�a�low�monthly�crime�rate�of�0.8�cases�per�10,000�persons�per�month1
•�Pollution levels: Air�pollution�levels�are�lower�than�those�in�Manila�and�Cebu.�However,�certain�congested�areas�of�Davao�City�witnesshigh�levels�of�pollution,�especially�during�peak�business�hours
•�Ease of commuting: Roads�in�Davao�City�witness�traffic�jams�in�peak�hours.�More�than�50,000�vehicles�use�the�city’s�roads�every�day.However,�the�government�has�implemented�a�synchronized�traffic�lights�project�in�early�2008�to�ease�peak�hour�traffic3
•�Availability of Hotels: Davao�City�is�a�popular�tourist�destination.�Though�the�city�does�not�have�any�major�international�chains,�anumber�of�luxury�and�standard�business�hotels�are�available.
Risk: City specific
•�Catastrophic risks: The�city�faces�low�risk�as�Davao�is�largely�a�typhoon�free�province�(while�a�majority�of�the�Philippines�is�prone�totyphoons).�However,�most�of�the�Philippines�lies�on�seismic�zone�IV�and�Davao�City�faces�high�risk�of�earthquake
• Political risks: Political�risk�is�low�with�a�stable�government�at�the�helm�of�the�city.
1 www.davaocity.gov.ph/doingbusiness, various pages, December 20082 www.adb.org/Media/Articles/2006/10057-Philippines-Davao-airport/default.asp, ADB website, 20063 Inquirer.net, Ayala center rising in Davao City, September 2008
4 Metro Manila or the “National Capital Region” is the urban agglomeration of about 636sq. kms. consisting of Manila city and the different suburban areas and urban fringearound Manila city, including Quezon city and Calloocan city
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Iloilo�City
Quick facts
GeographicLocation
Situated in central Philippines, it can be reached by air fromManila in 45 minutes
Time Zone GMT + 0800
Climate
The climate is pleasantly tropical with two pronouncedseasons – the rainy season and the dry season. Theaverage temperature is 26.5 degrees Celsius and averageannual rainfall is 172 cm
Population1 418,710
Literacy rate2 93.8 percent
Languages Hiligaynon, Tagalog, English, Chinese
Major industriesTelecommunications, agro-fisheries, small to medium scalelight industry.
1 Government of Philippines, Census 20072 Balita Philippines, CICT, BPAP and DTI name Iloilo city in the top 10 next wave cities for BPOs, 11 November 20083 Metro Manila or the “National Capital Region” is the urban agglomeration of about 636
sq. kms. consisting of Manila city and the different suburban areas and urban fringearound Manila city, including Quezon city and Calloocan city4 Figures received from BPAP, Philippines
Sources: 1 Iloilo City government website (2007)2 Philippines Census (2000)
Other sources: Iloilo city website, Philippines government tourism website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Iloilo City has been identified by the Philippines government as oneof the “next wave” cities for ICT services, making it eligible forgovernment funding in infrastructure development2
• The city is suited for creating supporting operations for companieswho wish to set up a hub-and-spoke model in the Philippines, byproviding a lower cost alternative to Metro Manila3 and Cebu city
• A large talent pool is available, owing to number of educationalinstitutions in the region
• The city is predominantly suited for voice-based operations due tothe strong English language skills in the population.
City Introduction
•�Iloilo�City�is�the�capital�of�the�Iloilo�province�located�in�the�Western�Visayasregion.�It�is�the�ninth�most�populous�city�in�the�Philippines1
•�It�was�historically�an�important�agricultural�center�in�the�country.
Key IT-BPO companies (Services offered)
Teletech (BPO services) Callbox (BPO services)
ePLDT (BPO services) Ever Sun (ADM services)
Source: ExploreIloilo.com
Current IT-BPO scenario in the city Development of the current IT-BPO industry2
•�Iloilo�City�has�seen�development�on�the�IT-BPO�front�in�the�last�two�to�three�years.�Theearliest�companies�to�set�up�were�ePLDT�Ventures�and�Callbox
•�A�few�more�BPO�companies�have�expressed�interest�to�set�up�in�Iloilo�City
•�The�Iloilo�Federation�for�Information�Technology,�and�the�Business�ProcessingAssociation�of�the�Philippines�(BPAP)�represent�the�IT-BPO�industry�in�the�city.
Industry Profile – Size and Specifics
•�BPO�exports�in�2007-08�from�the�city�were�USD�25�million4
•�There�were�seven�BPO�companies�operating�from�the�city,�with�around�2,600employed�in�2007-08.�By�September�2008,�the�number�of�companies�has�gone�up�to124
•�The�prominent�IT-BPO�services�sourced�from�Iloilo�City�include�call�center,�softwaredevelopment,�medical�and�other�data�transcription,�animation�and�digital�content,�andengineering�design.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�The�Iloilo�City�is�a�major�educational�hub�in�the�Western�Visayas�region�of�the�Philippines.�It�has�6�universities,�more�than�30�colleges�andtechnical�schools�graduating�more�than�17,000�students�every�year1
•�About�9�percent�of�these�students�graduate�in�IT�courses2,�making�specific�talent�available�for�the�IT-BPO�industry
•�English�is�taught�in�a�large�number�of�schools.�Philippines�is�the�third�largest�English-speaking�country3.�The�talent�pool�is�suitable�forcall�centers�due�to�their�diction,�and�cultural�similarities�with�the�US
•�Attrition�levels�are�relatively�lower�than�those�in�the�Tier�I�cities�in�the�Philippines.�
Infrastructure
•�Office space (IT Parks): Iloilo�City�faces�some�constraint�in�terms�availability�of�office�space�for�new�entrant�companies.�However,�a�newcommercial�and�IT�economic�zone�is�being�planned�by�Megaworld�in�Iloilo�City,�and�may�ease�the�shortage�to�some�extent4
•�Power supply: Power�supply�is�unreliable�and�companies�typically�have�their�own�power�generators�to�compensate�for�the�erratic�powersupply.�Iloilo�City�is�currently�getting�power�from�the�Visayas�grid�(sourced�from�geothermal�plants)�and�its�own�diesel-powered�plant,which�produces�80�to�90�MW2.�Recently,�Iloilo�City�officials�gave�the�nod�to�a�coal-fired�power�plant�which�may�be�able�to�supplyanother�100�MW�to�the�city5
•�Telecom Infrastructure: PLDT�(which�was�earlier�a�monopoly�provider)�and�Globe�Telecom�are�the�two�largest�players.�Some�regionallevel�players�also�provide�services�in�Iloilo�City.�By�and�large,�telecom�services�are�reliable
•�National and International connectivity: Iloilo�City�is�conveniently�located�and�connected�to�major�cities�in�the�country�by�road,�air�andwaterways.�The�initiatives�recently�undertaken�include�the�creation�of�the�new�Iloilo�International�Airport�which�started�operations�in2007�and�the�Roll-On-Roll-Off�facility�for�inter-ports�transport6
•�Upcoming projects: Urban�property�developer�Megaworld�Corporation�has�proposed�a�55-hectare�Iloilo�Business�Park�which�is�to�haveBPO�offices,�residential�condominiums,�a�hotel,�convention�center,�commercial�and�retail�center,�skills�training�center�and�recreationalfacilities4.
State/ city specific incentives for IT-BPO over and above country level incentives, if any7
•�Exemption�from�local�licenses,�fees,�and�dues:�A�registered�enterprise�in�Iloilo�city�is�fully�exempt�from�the�mayor's�permit�fees,�buildingpermit�fees,�and�other�kind�of�local�licenses,�fees�and�dues,�except�regulatory�fees
•�Reduction�of�Business�Tax:�Registered�enterprises�subject�to�the�period�of�availment�are�entitled�to�reduced�business�taxes�based�ongross�sales�or�receipts�earned�or�realized�during�the�previous�calendar�year.
Quality of life
•�Cost of living: The�cost�of�living�is�lower�than�that�in�Metro�Manila.�Prices�of�food�items�are�especially�lower
•�Crime rate: The�crime�rate�fell�from�908�crime�incidents�reported�to�the�Iloilo�Provincial�Police�Office�in�2005�to�543�in�20078
•�Pollution levels: Iloilo�City�suffers�from�a�problem�of�dust�pollution,�and�the�World�Bank�has�identified�the�city�among�the�nine�areas�inthe�Philippines�with�critical�pollution�levels9
•�Ease of commuting: Public�transport�is�inadequate;�cabs�and�“jeepneys”�are�the�popular�form�of�transport.�There�can�be�delays�andcongestion�during�peak�hours,�though�by�and�large�commuting�is�not�difficult
•�Availability of Hotels: Iloilo�City�has�a�healthy�supply�of�hotel�accommodation�throughout�the�year.�Standard�business�accommodationand�tourist�resorts�can�be�found�in�the�city,�though�no�major�international�chains�are�present.
Risk: City specific
•�Catastrophic risks: Iloilo�province�is�prone�to�typhoons.�In�June�2008,�floods�inundated�a�large�portion�of�residential�areas�in�Iloiloprovince�following�typhoon�"Frank“�and�caused�heavy�damage.�However,�disaster�preparedness�and�management�of�relief�operationsreceives�a�lot�of�focus�from�the�local�government9
•�Political risks: The�city�has�a�conducive�political�climate�and�sees�a�mix�of�public-private�sector�participation�in�major�development�areas
•�History of disruptions: The�city�is�prone�to�flooding�typically�following�three�continuous�days�of�rain.�However,�the�local�governmentplaces�a�lot�of�focus�on�disaster�preparedness�and�management�of�relief�operations.�The�disaster�management�system�is�generallyconsidered�to�be�effective�in�the�area�of�disaster�response.
1 LivinginthePhilippines.com website, December 20082 Inquirer.net, Iloilo gearing up to become ICT outsourcing hub, June 20083 www.gov.ph, Philippines government website, December 20084 Megaworldcorp.com, December 2008 and KPMG Analysis5 Inquirer.net, Iloilo officials give nod to coal-fired power plant, 22 October 2007
6 Iloiloviews, The Roadmap for Iloilo city, 26 March 20087 www.tourism.gov.ph/dot/inv_bora.asp, Tourism Philippines website, December 20088 Sunstar, Police Bare decline in Crime Rate, 21 January 20089 World Bank, Disaster Risk Management City of Iloilo, 2007
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Vietnam
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Vietnam�is�a�Socialist�Republic�with�single�party�rule.�The�unicameral�493-member�Quoc�Hoi(National�Assembly)�is�elected�every�five�years.�The�Communist�Party�of�Vietnam�and�itspolitburo,�control�the�electoral�process.�The�Assembly�appoints�the�President�and�theCabinet.�The�next�election�is�due�in�2012.�For�administrative�purposes,�it�is�subdivided�into59�provinces�and�five�municipalities.�Many�regional�governments�provide�incentives,�as�wellas�limits,�on�FDI.
Business and Investment ClimateForeign Direct Investment (FDI): FDI�received�for�2007�was�USD�6.73�billion,�almost�threetimes�as�much�as�that�for�2006�–�USD�2.36�billion3.
GDP growth: Growth�rate�of�GDP�in�2007�was�8.5�percent1,�slightly�higher�than�2006growth�rate�of�8.2�percent4.�The�EIU�has�revised�the�GDP�growth�forecast�for�2009�to�6.9percent,�from�7.3�percent�previously.
Inflation: Vietnam�reached�the�highest�inflation�rate�15.7�percent�in�the�last�decade�andfood�prices�were�up�by�25.2�percent5.�EIU�expects�inflation�to�drop�to�an�average�of�12percent�in�2009.
IT-BPO Scenario in the countryVietnam�clocked�USD�500�million�in�exports�of�outsourced�services�in�20076.�The�softwareindustry�aims�to�maintain�a�growth�of�35-40�percent�till�2010,�earning�up�to�USD�1�billionand�aims�to�make�it�among�the�top�15�destinations�for�software�outsourcing�and�export7.
Vietnam�has�over�750�software�firms�employing�35,000�people.�The�larger�firms�have�up�to1,000�employees7.�The�software�sector�in�the�country�started�getting�recognition�after�IBMopened�its�software�center�in�Vietnam.
Hanoi�and�Ho�Chi�Minh�City�are�the�two�popular�outsourcing�destinations�in�the�country.
Government incentives6
The�Vietnamese�government�provides�a�variety�of�incentives�to�the�IT-BPO�industry,�suchas:
•�Exemption�from�corporate�income�tax�for�four�years�from�the�date�of�generation�of�thefirst�taxable�income
•�Exemption�from�VAT�and�export�tax�for�software�products
•�Exemption�on�tariff�for�imported�materials�that�are�used�directly�in�software�production.
The�enforcement�of�IPRs�in�Vietnam�operates�in�the�general�framework�of�enforcement�andthe�“National�Office�of�Intellectual�Property”�plays�an�active�role�in�preparing�anddisseminating�the�national�policies�and�regulations�on�Intellectual�Property�Rights�(IPR)enforcement.�There�does�not�exist�a�special�system�for�IPR�enforcement�in�both�civil�andadministrative�procedures�and�resorting�to�administrative�procedures�and�remedies�torepress�an�IPR�infringement�is�regarded�as�more�effective�than�taking�a�case�to�court.
Vietnam
Size of the country 329, 560 sq. kms.
Population 86.15 million (2007)
Capital Hanoi
Currency Vietnamese Dong (VND)
1 USD = VND (Average) 15585.80 (2008)
Main macroeconomic indicators:
• GDP in PPP: USD 221.4 billion (2007 est.)1
• GDP per capita in PPP: USD 2,580 (2007 est.)1
• CPI: 24.5 percent (2007 est.)2
• Unemployment rate:5.3 percent (2007 est.)1
• FDI stock per capita: USD 494.8 (2007 est.)1
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating B / Negative
Standard & Poor’s ForeignCurrency Risk Rating
BB / Negative / B
Ease of Doing Business Rank(2009)
92
Rigidity of Employment Index(2009)
24
Country Snapshot
1 www.cia.gov, CIA Factbook, various pages, December 20082 www.eiu.com, various pages, December 20083 www.unctad.org/sections/dite_dir/docs/wir08_fs_vn_en.pdf, 20084 www.vietnamembassy-usa.org/news/story.php?d=20070405171545, US Embassy in Vietnam,April 2007
5 www.iht.com/articles/ap/2008/02/28/business/AS-FIN-ECO-Vietnam-Inflation.php, International Herald Tribune, February 2008
6 www.dpi.hochiminhcity.gov.vn/invest/html/ind1.html, Department of Planning & Investment,Vietnam, December 20087 hochiminhcity.osac.gov, December 2008
Sources: www.cia.gov, Gocurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Hanoi
Ho Chi Minh City
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Ho�Chi�Minh�City
Quick facts
GeographicLocation
Located on the Saigon River, it can be reached by air fromHanoi in two hours
Time Zone GMT + 0700
ClimateTropical warm climate with two seasons – the rainy seasonand the dry season. The average temperature is 27 degreesCelsius. The annual average rainfall is 180 cm
Population1 5,244,700
Literacy rate2 99 percent
Languages Vietnamese, Chinese, English, French
Major industries Garments, chemicals, electronics, food processing
1 www.vietnam.com/travel/2/Ho-Chi-Minh-City-Saigon, December 20082 www.dpi.hochiminhcity.gov.vn/invest/html/abo4.html, Department of Planning & Investment,December 2008
3 Saigoninvest website, Thu Thiem Software Park Project - Ground Breaking Ceremony, July 2008
4 www.dpi.hochiminhcity.gov.vn/invest/html/ind1.html, Department of Planning & Investment,Ho Chi Minh City, December 20085 SearchCIO, Offshoring in Ho Chi Minh City promising, April 20086 Business-in-asia, The Software Industry in Vietnam, 2004
Sources: 1 Citypopulation.de (2007)2 Department of Planning & Investment, Ho Chi Minh City (2007)
Other sources: VietnamOpenTour.com, Department of Investment and Planning, Ho Chi Minh City
Key drivers for the city to emerge as a favorable IT-BPOdestination
• The government of Ho Chi Minh City has approved a plan todevelop the city into an IT hub by 2010, by providing variousincentives2
• Proactive measures are being taken to improve the city’sinfrastructure, including telecom, power and transport
• The largest software park in Vietnam, the Thu Thiem SoftwarePark, is scheduled to come up by 2012 in Ho Chi Minh City3
• Ho Chi Minh City has a young population with 60 percent peopleunder 35 years4
• The city has a large talent pool, with 41,600 college and vocationalschool students passing out every year5
• Salaries and costs of living are lower than capital Hanoi and someof the larger cities in Asia.
City Introduction
•�Ho�Chi�Minh�City,�Vietnam’s�largest�city,�is�a�major�port�and�an�importanteconomic�center1
•�It�is�also�a�popular�tourist�center�in�Vietnam.
Key IT-BPO companies (Services offered)*
IBM (IT services) Oracle (IT services)
Cyrus Intersoft (ITservices)
Digi-Texx (BPO services)
Harvey Nash (BPOservices)
OutsourceIT International(Staffing services)
Sources: Saigon Hi-Tech Park website, Amcham Vietnam
Current IT-BPO scenario in the city Development of the current IT-BPO industry6
•�The�IT�industry�in�Ho�Chi�Minh�City�dates�back�to�the�last�decade,�with�TMA�Solutionsbeing�one�of�the�earliest�companies
•�Ho�Chi�Minh�City’s�Saigon�Software�Park�started�in�2001�was�the�first�software�park�inVietnam
•�Despite�the�early�activity,�most�of�the�companies�in�Ho�Chi�Minh�City�are�small�tomedium�enterprises.�The�city�is�yet�to�garner�scale�and�move�to�providing�higher�value-adding�services.
Industry Profile – Size and Specifics4
•�Vietnam’s�software�export�revenues�crossed�USD�500�million�in�2007.�Ho�Chi�Minh�Citycontributes�between�50�and�60�percent�to�the�country’s�software�exports
•�Over�6000�people�are�employed�in�the�IT-BPO�industry�in�the�city
•�About�250�to�300�companies�are�operating�from�the�city
•�The�key�services�provided�are�software�development�and�BPO�services.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Ho�Chi�Minh�City�has�30�universities�and�27�vocational�schools1,�including�numerous�business�schools�and�programs
•�There�is�a�large�talent�pool,�with�about�262,000�university�students�and�41,600�college�and�vocational�school�students�passing�out�everyyear1.�Ho�Chi�Minh�City�also�attracts�students�and�working�professionals�from�suburban�areas�and�neighboring�provinces
•�Employability�of�the�workforce�is�relatively�low.�However,�the�large�talent�pool�may�currently�be�able�to�compensate�for�this
•�Attrition�rates�are�below�10�percent2,�relatively�lower�than�those�in�other�established�IT-BPO�locations.�
Infrastructure
•�Office space (IT Parks): The�vacancy�rate�in�Ho�Chi�Minh�City�remains�very�low.�However,�over�the�next�12�months,�the�office�market�isexpected�to�see�approximately�165,000�sq.�mts.�of�prime�office�space3 being�made�available
•�Power supply: Power�supply�to�the�city�is�currently�not�uninterrupted,�and�there�are�scheduled�power�outages.�Although,�in�thesoftware�park�areas,�power�supply�is�more�reliable.�Saigon�Hi-Tech�Park�(SHTP)�plans�to�build�a�standby�power�plant�using�gas�turbinesto�ensure�non-stop�supply4
•�Telecom Infrastructure: Adequate�bandwidth�for�high-speed�Internet�access�is�available�in�the�city.�Further,�FTP�Telecom,�a�Vietnamesecompany�has�planned�the�Asia-America�Gateway�(AAG)�project,�valued�at�USD�560�million,�expected�to�provide�a�20,000�kms�directcable�route,�and�better�speeds�and�telecom�reliability�by�the�end�of�20085
•�National and International connectivity: Ho�Chi�Minh�City�is�connected�by�rail,�road,�river�and�air�to�major�cities�in�Vietnam.�The�TanSon�Nhat�Airport�is�the�largest�airport�in�Vietnam,�connecting�to�20�countries6.�Corridor�development�involving�the�four�new�suburbancenters�(Thu�Duc,�District�12,�Binh�Chanh,�Saigon�South)�in�suburban�areas�of�the�city,�including�rail�and�bus�transit�for�the�inner�cityarea�has�been�planned7
•�Upcoming projects: The�planned�Thu�Thiem�Software�Park�is�scheduled�to�come�up�in�District�Two�of�Ho�Chi�Minh�City.�The�Park�is�tocreate�487,500�sq.�mts.�of�office�space,�residential�and�retail�areas�and�a�training�center�that�is�likely�to�be�fully�operational�by�20128.�
State/ city specific incentives for IT-BPO over and above country level incentives, if any1
•�Businesses�involved�in�software�production�and�services,�both�local�and�foreign�invested,�are�exempt�from�corporate�income�tax�for�fouryears�from�the�date�taxable�income�is�produced
•�Export�of�software�products�is�tax�free
•�Vietnamese�software�businesses�attract�free�or�reduced�land�use�costs.
Quality of life
•�Cost of living: Cost�of�living�is�relatively�lower�compared�with�the�capital�Hanoi
•�Crime rate: Violent�crimes�are�rare,�but�the�city�is�prone�to�petty�crimes�such�as�pick-pocketing
•�Pollution levels: The�city�suffers�from�noise�and�air�pollution�problems,�especially�at�congested�areas
•�Ease of commuting: Public�transport�is�limited,�and�locals�mostly�use�their�own�transport�–�in�the�form�of�motorcycles,�bicycles�or�taxis.Traffic�jams�are�common�during�peak�hours
• Availability of Hotels: Ho�Chi�Minh�City�has�more�than�18�four-star�and�above�hotels,�including�international�chains.�However,�averageoccupancy�rates�are�high�due�to�a�large�number�of�tourists9.
Risk: City specific
•�Catastrophic risks: Ho�Chi�Minh�City�is�periodically�affected�by�floods�owing�to�incessant�rains�and�river�tides
•�Political risks: Low�risk,�due�to�a�stable�political�system�in�Vietnam
•�History of disruptions: Aside�from�unrest�in�the�central�highlands�in�2001�and�2004,�political�demonstrations�are�uncommon�and�thethreat�from�civil�unrest�in�the�city�is�generally�minimal10.
1 www.dpi.hochiminhcity.gov.vn, Department of Investment & Planning, various pages,December 20082 SearchCIO, Offshoring in Ho Chi Minh City promising, April 20083 Cushman Wakefield, Ho Chi Minh City, Second half, 20084 www.shtp.hochiminhcity.gov.vn, December 20085 Trade and Business Information Center, Vietnam's FPT Telecom to boost optical cable project, February 20086 www.hochiminhcityairport.com, December 2008
7 www.eng.hochiminhcity.gov.vn, Ho Chi Minh city Development Plan, December 20088 Saigoninvest website, Thu Thiem Software Park Project - Ground Breaking Ceremony, July 20089 CB Richard Ellis, “Why Vietnam”, 200710 OSAC, Vietnam Crime & Safety Report: Ho Chi Minh City, 2007
78
Europe, Midd
dle-East & Africa
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Europe�is�primarily�characterized�by�its�great�diversity,�add�thecountries�of�Middle�East�and�Africa�into�the�mix�and�the�choice�oflocation�alternatives�in�the�EMA�region�can�become�bewildering�forthe�potential�investor.�
The�differences�between�Slovakia�and�Slovenia�or�between�Latvia�andLithuania�may�not�seem�apparent�at�first,�yet�upon�closer�scrutinythese�differences�could�be�significant�when�selecting�an�IT-BPOlocation.�Most�of�the�EMA�region�comprise�of�relatively�smallcountries�and�cities�with�specialist�skill�sets�available�in�variousdestinations,�such�as�linguistic�abilities�or�technical�expertise.�
In�EMA,�there�are�the�established�locations�in�Western�Europe,�wherecities�in�the�UK,�Spain,�Ireland,�the�Netherlands,�Belgium�or�parts�ofGermany�still�offer�significant�advantages:�a�qualified,�multilinguallabor�force,�excellent�infrastructure�and�an�attractive�businessenvironment.�
Recently,�locations�in�the�new�European�Union�(EU)�member�statesentered�into�the�fray�and�have�become�the�centre�of�focus�for�BPOlocation�decisions.�Cities�such�as�Budapest,�Prague,�Bratislava,Bucharest�or�Krakow�have�established�a�solid�reputation�as�BPOlocations.�These�cities�offer�attractive�conditions,�especially�forcompanies�looking�for�a�good�base�of�experience�and�“proof�ofconcept”�at�costs�below�Western�European�levels.�
The�attention�of�some�companies�in�EMA�has�now�shifted�tolocations�outside�of�the�EU,�including�cities�in�the�fast�growingcountries�of�the�Middle�East�(such�as�Cairo�in�Egypt),�Africa�(PortLouis�in�Mauritius�and�Tunis�in�Tunisia)�and�the�aspiring�states�in�theBalkans�(Zagreb�and�Belgrade�in�Croatia�and�Serbia�respectively).�Thechoice�of�locations�for�this�study�reflects�this�trend.�
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Bulgaria 83Sofia 85
Belfast 101
Romania 107Cluj-Napoca 109
Ukraine 123Lviv 125
Egypt 91Cairo 93
EMA - Table of Contents
Croatia 87Zagreb 89
Mauritius 95Port Louis 97
Poland 103Gdansk 105
Northern Ireland 99
Russia 111Rostov-on-Don 113
Serbia 115Belgrade 117
Tunisia 119Tunis 121
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Bulgaria
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Bulgaria�has�a�unicameral�legislature.�The�240-member�National�Assembly�is�constitutionallythe�highest�state�authority.�Its�members�are�elected�by�proportional�representation.�A�newconstitution�was�passed�in�July�1991.�The�head�of�state�is�a�directly�elected�non-executivePresident,�under�a�system�of�majority�representation�every�five�years�for�a�maximum�oftwo�terms.�A�Vice-president�assists�the�President.�Bulgaria�is�a�member�of�North�AtlanticTreaty�Organization�(NATO),�and�the�EU�since�2007.
There�are�28�provinces�in�Bulgaria,�which�may�have�different�incentives�for�investment,especially�due�to�the�differing�unemployment�rates�across�the�country.�
Business and Investment ClimateForeign Direct Investment (FDI): FDI�in�2007�was�USD�8.6�billion,�up�from�USD�8.3�billionin�2006.�The�forecast�for�2008�is�USD�6.3�billion�due�to�the�economic�slowdown2.
GDP growth: EIU�estimates�real�GDP�growth�to�be�6.4�percent�in�2008,�but�is�likely�to�slowdown�to�3.4�percent�in�2009�and�average�around�4�percent�in�2010.
Inflation: Inflation�was�6.5�percent�on�average�in�2005�and�2006,�and�fell�to�5.0�percent�in2007.�The�average�expected�inflation�in�2008�is�6.0�percent3.
IT-BPO Scenario in the countryBulgaria’s�IT�outsourcing�market�earned�USD�256�million�in�revenue�in�20074.�More�than400�companies�are�providing�outsourcing�services,�and�employ�close�to�8,000�people4.These�include�at�least�10�BPO�companies5.�Call�center�and�support�services�are�among�thepopular�services�sourced�from�Bulgaria.
The�Bulgarian�software�industry�has�been�growing�at�about�30�percent�per�annum3.�TheBulgarian�Association�of�Software�Companies�(BASSCOM)�represents�IT�companies�inBulgaria.
Sofia�is�the�capital�and�an�emerging�city�for�the�IT-BPO�industry�in�Bulgaria.
Government incentives3
Amendments�were�made�to�the�Investment�Promotion�Law�in�2007,�to�include�thefollowing�incentives�for�companies�in�the�high�tech�sector,�based�on�the�volume�ofinvestment�meeting�certain�minimum�criteria:
•�Corporate�tax�rate�of�10�percent�as�of�1.1.2007
•�Zero�percent�corporate�tax�rate�in�141�out�of�264�municipalities�with�high�unemploymentrates
•�Ten�percent�flat�tax�rate�on�personal�incomes�as�of�January�2008
•�Increased�depreciation�rate�to�50�percent�for�purchasing�new�production�and�technologyequipment,�machinery,�software�and�hardware.
Bulgaria
Size of the country 110,910 sq. kms.
Population 7.6 million (2007)
Capital Sofia
Currency Lev (BGL)
1 USD = BGL (average) 1.26 (2008)
Main macroeconomic indicators:
• GDP in PPP: USD 86.4 billion (2007 est.)1
• GDP per capita in PPP: USD 11,400 (2007 est.)1
• CPI: 5.8 percent (2007 est.)1
• Unemployment rate: 8.0 percent (2007 est.)1
• FDI stock per capita: USD 4,553 (2007 est.)2
2008 (Rating/outlook)
EIU's Sovereign Risk Rating BBB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BBB / Negative / A-3
Ease of Doing Business Rank(2009)
45
Rigidity of Employment Index(2009)
29
Country Snapshot
1 www.eiu.com, various pages, December 2008
2 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008
3 www.investbulgaria.com/BulgarianCallCentersSector.php, December 2008
4 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007
5 DTZ Research, 2007
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Sofia
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Sofia
Quick facts
GeographicLocation
Situated at the foot of Vitosha Mountain, which is locatedin the west part of the country. Sofia is reachable withinthree hours by air from London
Time Zone GMT +0200
Climate
Moderate, continental climate with average summertemperature between 24 and 28 degrees Celsius andaverage winter temperature between 0 and – 4.9 degreesCelsius. The average rainfall is 65 cm
Population1 1.22 million
Literacy rate1 98.5 percent*
Languages Bulgarian, English, German, Turkish, Armenian, Hebrew
Major industriesManufacturing, financial services, construction, trade andtransport
1 www.investbulgaria.com/BulgarianCallCentersSector.php, December 2008
2 Xerox Service Center, Creative and knowledge workers in Region Sofia, 2008
3 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007
4 InvestBulgaria Agency, Bulgaria BPO Factsheet, March 2008
5 opiglobal.com, December 2008
Sources: 1 Sofia Municipality website * Data for Bulgaria
Other sources: Guide-Bulgaria website, Bulgariancoast.com
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Sofia’s education system is focused on technical education, andclose to half the students are enrolled in ICT-related courses1
• The IT and software industry is a key priority area for thegovernment and receives focus in terms of incentive packages andsupport to IT companies investing in the country
• The city provides good standard of living within Bulgaria, with itsper capita income about double the national average2
• The similar time-zone and geographic proximity is an advantage forproviding near-shore services to Western European companies
• Sofia provides a significant labor cost advantage over cities inWestern Europe. Estimates suggest that in Bulgaria, labor costsare around 10 percent of those in Germany3.
City Introduction
•�Sofia�is�the�capital�of�Bulgaria��
•�The�city�is�the�major�economic,�scientific�and�cultural�center�of�the�country.
Key IT-BPO companies (Services offered)
SAP (Software developmentcenter)
Sciant (IT services)
IBM (BPO services) HP (IT service center)
Sony (Call center)Logicall (BPO andsupport center)
Sources: Bulgaria BPO Factsheet
Current IT-BPO scenario in the city Development of the current IT-BPO industry4
•�In�2006,�HP�started�a�center�in�Sofia�to�cater�to�the�EMA�markets.�The�center�employsclose�to�1,200�people2
•�In�2006,�OPI,�a�US�based�BPO,�established�its�center�in�Sofia,�for�near-shore�services.It�employs�125�professionals�delivering�F&A�services�in�English,�Bulgarian,�Dutch,French,�German,�Italian,�Polish,�Portuguese,�and�Spanish5
•�IBM�has�had�a�global�delivery�center�since�2007,�providing�procurement�BPO�services2
•�SAP�employs�over�470�employees�and�has�had�a�center�in�Bulgaria�since�20012
•�Outsourcing�companies�such�as�HP�have�collaborated�with�Bulgarian�universities�toenhance�workforce�skills�and�help�ensure�supply�for�technology�investment�projects2.
Industry Profile – Size and Specifics
•�The�majority�of�the�IT-BPO�industry�in�Bulgaria�is�currently�concentrated�around�Sofia.Estimates�suggest�that�close�to�80�percent�of�the�IT-BPO�employees�in�Bulgaria�are�inSofia3
•�Services�provided�from�Sofia�include�IT�support�services,�call�center,�technical�support,procurement,�and�finance�and�accounting�services4.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.investbulgaria.com/BulgarianCallCentersSector.php, December 2008
2 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007
3 InvestBulgaria Agency, Bulgaria BPO Factsheet, March 2008
4 www.propertywisebulgaria.com, MBL estimates, January 2008
5 Invest Bulgaria, Bulgaria's power grid operator warns of Electricity shortage, 2008
6 www.btc.bg/en, Bulgaria Telecommunications Company website, December 2008
7 www.travel-bulgaria.com, December 2008
8 www.technoparksofia.com, December 2008
9 OSAC, Bulgaria Crime and Safety Report, 2007
10 www.sofiaecho.com/article/polluted-soil-air-endanger-health-in-24-cities-and-villages-in-bulgaria/id_33702/catid_66, 2008
11 KPMG analysis based on various news articles
12 www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/05/16/BUGANIS78M1.DTL&type=printable,2008
Human Resources
•�Sofia�has�22�universities�and�polytechnic�institutions,�which�produce�a�large�pool�of�potential�entry-level�technical�graduates.�Over�18,000students�graduated�from�universities�in�20051
•�The�key�technical�universities�in�Bulgaria�have�introduced�programs�to�meet�the�demands�of�the�outsourcing�industry,�includingcomputer�science�curricula�and�joint�research�labs�in�co-operation�with�the�multinational�companies�in�the�city2.�According�to�varioussurveys�in�Bulgaria,�close�to�50�percent�of�students�are�enrolled�in�ICT-related�training1
•�According�to�the�World�Bank,�the�Bulgarian�educational�system�ranks�fifth�in�the�world�overall�and�11�in�mathematics.�Bulgaria�also�hasone�of�the�highest�numbers�of�information�technology-certified�professionals�per�capita�in�the�world12
•�Bulgarian�is�the�principal�language�for�the�transaction�of�business.�About�15�percent�of�the�population�speaks�English1,�making�it�theleading�foreign�language�spoken�in�the�city.�In�addition�there�is�capability�in�several�other�European�languages�amongst�the�workforcemaking�multi-lingual�service�delivery�possible
•�Workforce�turnover�is�about�10�to�15�percent�per�annum3.
Infrastructure
•�Office space (IT Parks): Around�65,000�sq.�mts.�of�new�office�space�were�added�in�Sofia�in�the�third�quarter�of�2008.�In�the�sameperiod,�several�new�projects�were�initiated,�which�are�likely�to�add�over�218,000�sq.�mts.�of�office�space�to�Sofia’s�central�business�area.Sofia’s�vacancy�rate�is�likely�to�reach�10�percent�by�the�end�of�20084
•�Power Supply: The�power�supply�in�Sofia�is�generally�uninterrupted,�with�rare�outages5
•�Telecom Infrastructure: Broadband�and�internet�services�are�reliably�available.�Bulgaria�Telecommunications�Company�is�the�largestprovider�in�the�city6
•�National and International connectivity: Sofia�is�linked�by�road�and�rail�to�other�cities�in�Bulgaria�and�Europe.�The�International�Airportin�Sofia�offers�connections�to�Europe,�Africa,�the�Middle�East�and�North�America7
•�Upcoming projects: The�Techno�Park�Sofia,�to�be�built�over�6,000�sq.�mts.�of�land�was�started�in�2005.�The�first�building�of�the�project�isalready�complete,�with�the�project�expected�to�be�completed�by�20108.
State / city specific incentives for IT-BPO over and above country level incentives, if any
•�There�are�no�specific�investment�incentives�for�IT-BPO�companies.
Quality of life
•�Cost of living: Cost�of�living�is�relatively�low�compared�to�other�cities�in�Europe.�As�per�Mercer’s�2008�Annual�Cost�Of�Living�Index,Sofia�is�the�least�expensive�European�city�for�expatriates�in�97�place,�although�the�city�has�climbed�11�places�in�the�overall�ranking�oflast�year
•�Crime rate: Petty�crime,�such�as�pick-pocketing,�is�common�in�Sofia.�The�city�also�witnesses�some�organized�crime9
•�Pollution levels: Air�pollution�in�Sofia,�especially�in�the�central�area,�can�be�quite�high.�A�report�by�the�government�in�December�2008lists�health�hazards�due�to�air�pollution�in�Sofia�to�be�high10
•�Ease of commuting: Public�transport�is�well�developed�and�includes�three�Trans-European�Transport�Corridors�across�the�city,underground�trains,�buses,�trams�and�electric�buses7
•�Availability of Hotels: There�are�over�70�hotels,�including�international�chains,�providing�a�large�number�of�rooms7.
Risk: City specific
•�Catastrophic risks: Sofia�is�prone�to�floods,�especially�in�summer11�
•�History of disruption: Demonstrations�to�protest�or�advocate�specific�causes�are�common,�but�these�are�generally�peaceful9.
86
Croatia
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure2
The�Republic�of�Croatia�is�a�Parliamentary�democracy.�The�President�is�the�head�of�state,directly�elected�for�a�term�of�five�years.�The�government�is�headed�by�the�Prime�Ministerand�comprised�of�two�chambers,�the�house�of�representatives�and�the�house�of�counties.Members�of�both�chambers�serve�four-year�terms.�Croatia�administratively�consists�of�20counties�and�1�city�(Zagreb).
The�country�is�an�official�European�Union�candidate�and�in�the�process�of�negotiating�itsentry�for�2010.�The�European�Commission�assessed�Croatia's�progress�towards�EUmembership�positively�in�its�latest�report,�even�though�it�called�for�further�reforms.
Business and Investment ClimateForeign Direct Investment (FDI): Privatization�has�been�completed�in�most�sectors,encouraging�foreign�investors�to�invest�in�the�country.�FDI�inflows�into�Croatia�amounted�toUSD�4.8�billion�in�2007�and�are�expected�to�slow�down�to�USD�3.7�billion�in�2008¹.
GDP growth:Real�GDP�growth�in�Croatia�was�5.7�percent�in�2007.�It�is�expected�to�be�3.1percent�in�2008�mainly�due�to�the�economic�slowdown�as�a�result�of�reduced�exports�andtourism¹.
Inflation: Wholesale�price�inflation�has�remained�stable�between�2�and�3�percent�in�thepast�years.�It�is�expected�to�be�approximately�6�percent�in�2008,�and�3.5�percent�in�20093.
IT-BPO Scenario in the countryThe�turnover�in�Croatia’s�IT�industry�is�expected�to�increase�from�USD�920�million�in�2007to�around�USD�1.5�billion�in�20124.�The�Croatian�IT�outsourcing�industry�is�as�yet�nascentand�earned�revenues�of�USD�32�million�in�20075.
More�than�1,200�companies�are�active�in�the�IT�field4,�with�about�70�companies�providingoutsourcing�services5 in�areas�such�as�software�consultancy,�custom�applicationdevelopment,�consultancy�or�customization�services�and�system�integration�services.
The�Croatian�Association�of�Software�and�Online�Entrepreneurs�and�the�CroatianInformation�Technology�Society�are�the�associations�representing�the�IT-BPO�industry�in�thecountry.
Government incentives6
According�to�Croatia’s�national�trade�and�investment�promotion�agency,�strategic�businesssupport�services�(including�customer�contact,�shared�service�and�software�developmentcenters)�can�benefit�from�investment�grants.�The�government�provides:
•�Tax�incentives�depending�on�the�investment�sum�and�number�of�newly�generated�jobs
•�Employment�incentives�depending�on�the�local�unemployment�rate,�eligible�costs�andquality�of�work�conducted
•�Subsidized�training�costs�linked�to�an�investment.
Croatia
Size of the country 87,600 sq. kms.
Population 4.4 million (2007)
Capital Zagreb
Currency Croatian Kuna (HRK)
1 USD = HRK (average) 4.70 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 69.03 billion (2007 est.)
• GDP per capita in PPP: USD 15,360 (2007 est.)
• CPI: 5.8 percent (2007)
• Unemployment rate: 15.1 percent (2007)
• FDI stock per capita: USD 9577 (2007 est.)7
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BBB / Negative / A-3
Ease of Doing Business Rank(2009)
106
Rigidity of Employment Index(2009)
50
Country Snapshot
1 www.eiu.com, various pages, December 2008
2 www.vlada.hr/en, Croatian government website, December 2008
3 CIA Factbook, 2008
4 Business Monitor International, 2008
5 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007
6 www.apiu.hr, Croatian Trade and Investment Promotion Agency website, December 2008
7 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Zagreb
88
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Zagreb
Quick facts
GeographicLocation
Situated in the north-west of Croatia. Zagreb is reachablewithin one to three hours by air from most European cities
Time Zone GMT +0100
Climate
Mostly continental / Mediterranean climate. The averagesummer temperature is 23 degrees Celsius, while averagewinter temperature is 0.5 degrees. The average rainfall is89 cm.
Population1 784,900
Literacy rate2 98.1 percent*
Languages3 Croatian, English, German, Italian*
Major industries4 Foods and beverages, tourism, chemicals
1 www.apiu.hr, Croatian Trade and Investment Promotion Agency, December 2008
2 www.apiu.hr, Croatian Trade and Investment Promotion Agency, December 2008
3 www.ibm.com/employment/hr/, December 2008
4 www.idc-cema.com/?showproduct=34518, IDC Press release, 2008
5 Croatia Trade and Investment Promotion Agency publication: IT and Software Development inCroatia
Sources: 1 City Government, Zagreb2 CIA Factbook 3 Hill International Country Report: Croatia4 Embassy of India in Croatia website
Other sources: Croatia Tourist Information Service , Travel websites Info Croatia, Euomost/ * Country level
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Zagreb has a large, educated workforce, especially technicallyqualified graduates
• The workforce is oriented towards services due to a boomingtourism industry
• The workforce speaks English as well as Western Europeanlanguages such as German, Italian and Russian, which allowsmulti-lingual service delivery
• The city also serves as a base to offer services to proximal marketsin Central and Eastern Europe such as Romania, Slovenia andBulgaria.
• Zagreb has a time-zone advantage suitable to provide near-shoreoutsourcing services to Western European markets
• It offers a relative cost advantage over Western European cities.
City Introduction
•�Zagreb�is�the�capital�and�largest�city�of�Croatia1
•�It�is�the�commercial�and�industrial�center�of�Croatia,�and�contributesapproximately�50�percent�to�Croatia’s�total�GDP1.
Key IT-BPO companies (Services offered)
IBM (IT services) Verso (IT services)
Envox (Softwaredevelopment)
Infodom (IT services)
GISDATA’s (Softwaredevelopment and ITservices)
Siemens (Softwaredevelopment)
Sources: Company websites, Croatia Trade and InvestmentPromotion Agency
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�IBM�set�up�its�operation�in�Zagreb�in�1995�and�presently�employs�200�people�to�servethe�Croatian�market�and�export�services�to�Australia�and�the�Middle�East.�Its�mainservices�include�consulting�services,�market�support,�business�innovation,�systemsand�education�services3
•�IDC�serves�Slovenia,�Bulgaria,�Romania,�Serbia,�Bosnia�and�Macedonia�from�itsAdriatic’s�headquarters�in�Zagreb4 employing�research�analysts�and�ICT�industryspecialists�in�the�city5
•�Other�multinational�players�include�CISCO�Systems�employing�20�employees�in�thecity.�Oracle,�which�established�an�academic�institute�at�the�university�of�Zagreb;Siemens�Croatia�with�its�headquarters�in�Zagreb�and�Envox�with�more�than�20employees�in�the�city5.
Industry Profile – Size and Specifics
•�More�than�two�thirds�of�Croatia’s�ICT�companies�are�based�in�Zagreb�and�employapproximately�12,000�people�in�the�city�and�its�region2
•�Key�services�provided�by�national�and�international�companies�include�research�anddevelopment,�software�development�and�customer�support
•�Main�foreign�serviced�markets�include�Bosnia�and�Herzegovina,�Slovenia,�Austria,Germany�and�Italy.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.unizg.hr, University of Zagreb, December 2008
2 www.zagreb.hr, City of Zagreb website, December 2008
3 www.apiu.hr, Croatian Trade and Investment Promotion Agency, December 2008
4 Hill International Country Report: Croatia, December 2008
5 Colliers International, Second Half 2008
6 OSAC Report – Croatia Crime and Safety Report, 2008
7 Journal of Applied Sciences and Environmental Management, Flood Risk Assessment Zagreb,2004
8 Croatia Trade and Investment Promotion Agency publication: Think Profit Think Croatia, 2008
9 www.toming.si/pdf/Zagreb.pdf, Toming Report on Zagreb, 2008
10 Environment for Europe document: Municipal environmental investments in South Eastern
Europe: 2001 – 2005
Human Resources
•�Zagreb’s�universities�and�polytechnic�institutions�produce�a�pool�of�potential�entry-level�workforce.�More�than�10,000�students�areenrolled�into�technical,�mathematical,�electrical�engineering�and�IT-related�courses,�with�1,000�graduating�annually�in�IT�and�electricalengineering.�The�University�of�Zagreb�Computing�Centre�has�considerable�computing�resources�and�is�the�center�of�Serbia’s�national�e-infrastructure¹
•�Unemployment�in�Zagreb�is�at�about�7.4�percent2,�and�includes�graduates,�experienced�individuals�as�well�as�service-orientedprofessionals.�These�constitute�an�employable�talent�pool�in�the�city
•�Fifty�percent�of�Zagreb’s�population�speak�English,�and�almost�every�IT�professional�speaks�English�and�a�second�foreign�language3
•�Labor�costs�in�the�software�sector�are�above�average�compared�to�other�Croatian�industries,�and�IT�experts�are�one�of�the�best-paidspecialists�in�the�region.�According�to�various�sources,�salaries�in�Zagreb�are�approximately�20�percent�higher�than�in�other�Croatianregions4
•�Zagreb�enjoys�a�high�inflow�of�Individuals�in�search�of�employment.�
Infrastructure
•�Office space (IT Parks): There�is�an�adequate�supply�of�modern�office�space�(class�A�and�B)�with�500,000�sq.�mts.�currently�available.This�represents�a�vacancy�rate�of�approximately�7�percent5
•�Telecom Infrastructure: Croatian�telecommunication�infrastructure�has�been�modernized�and�liberalized�and�is�a�100�percent�digitalizednetwork8
•�National and International connectivity: Zagreb�is�the�hub�of�five�major�Croatian�highways9.�Most�European�capitals�are�accessibleby�railway�from�Zagreb.�Zagreb�international�airport�has�flight�connections�to�domestic�and�international�cities,�including�cities�in�morethan�20�European�countries
•�Upcoming projects: Currently,�there�are�only�a�few�office�buildings�under�construction�in�Zagreb,�which�are�expected�to�bring�additionalan�80,000�sq.�mts.�of�office�space�in�the�next�2�to�3�years5.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�There�are�no�specific�investment�incentives�for�IT-BPO�companies�in�the�city�of�Zagreb.
Quality of life
•�Cost of living: Cost�of�living�is�relatively�high�compared�to�other�cities�in�Croatia.�However,�Zagreb�ranks�49�in�Mercer’s�2008�AnnualCost�of�Living�Index,�which�makes�the�city�less�expensive�than�other�developing�Eastern�European�capitals�like�Riga,�Warsaw�or�Prague
•�Crime rate: Croatia�has�a�relatively�low�crime�rate�compared�to�European�and�US�standards�and�the�city�is�considered�to�be�generallysafe6
•�Pollution levels: Air�pollution�levels�are�on�the�rise�in�the�city.�However,�Zagreb’s�government�is�carrying�out�several�environmentalprograms�including�the�sanitation�of�the�utility�waste�depot�in�Jakusevac,�an�open�dump�about�15�km�from�Zagreb,�which�is�currently�acause�for�concern�in�terms�of�environmental�pollution10
•�Ease of commuting: Public�transportation�in�Zagreb�is�provided�through�trams�and�buses.�Congestion�during�rush�hours�is�common�inthe�city’s�central�areas�
•�Availability of Hotels: There�are�36�hotels,�including�international�chains,�providing�approximately�6,000�beds2.
Risk: City specific
•�Catastrophic risks: Zagreb�is�located�in�a�seismically�active�region�and�minor�tremors�are�occasionally�felt6.�The�city�is�also�prone�tofloods7.
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Egypt
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Egypt�is�an�Arab�Republic�with�a�democratic�system.�The�President�is�the�head�of�state,nominated�by�a�two-thirds�majority�of�the�People's�Assembly,�which�is�the�legislative�body.A�Council�of�Ministers,�headed�by�the�Prime�Minister�supervise�the�work�of�thegovernment.�Administratively,�Egypt�is�divided�into�26�Governorates,�each�headed�by�aGovernor� who�is�appointed�by�the�President.�
Business and Investment ClimateForeign Direct Investment (FDI): Egypt�implemented�policy�reforms�leading�to�a�15-foldincrease�in�FDI�between�2001�and�2006.�Inflows�into�the�country�have�almost�doubledbetween�2006�and�2007�accounting�for�USD�11.6�billion�in�2007.�FDI�is�expected�to�be�USD9.8�billion�in�20081 ,�as�a�result�of�the�slowdown.
GDP growth: Real�GDP�grew�by�7.2�percent�in�2007.�Despite�the�slowdown�of�the�globaleconomy,�real�GDP�is�expected�to�grow�at�an�annual�rate�of�5.7�percent�in�20081 .
Inflation: Inflation�rate�rose�to�23.7�percent�in�August�2008�mainly�due�to�rising�fuel�prices.However,�it�is�expected�to�fall�to�an�average�of�9�percent�in�2009�as�a�result�of�fallingcommodity�prices1.
IT-BPO Scenario in the countryThe�Egyptian�ICT�sector�has�grown�by�25�percent�in�2007�and�is�one�of�the�sectors�foreconomic�development�identified�by�the�government2.�About�162,500�people�wereemployed�in�the�ICT�sector�in�2007,�an�increase�of�9�percent�on�the�workforce�in�20063.
One�of�the�first�companies�to�position�Egypt�in�the�international�IT-BPO�sector�was�Xceed,a�subsidiary�of�Telecom�Egypt�and�the�largest�domestic�call�center�operator4.
Other�Egyptian�call�center�operators�with�clients�in�North�America�and�Europe�include�RayaContact�Center,�E�Group�Connections�and�C3.�International�companies�operating�in�Egyptinclude�Oracle,�Wipro,�IBM,�Dell,�Oracle,�Microsoft,�Alcatel�and�Orange�Business�Services5.
Currently,�most�of�the�outsourcing�activity�in�Egypt�is�concentrated�around�its�capital�cityCairo5,�while�Alexandria�and�Damietta�are�also�being�promoted�as�emerging�cities.
Government incentives6
The�Government�is�eager�to�attract�foreign�investment,�especially�in�the�ICT�and�BPOsectors.�Incentives�include:
•�Corporate�income�tax�exemptions�and�other�tax�abatements
•�Free�rent�for�specific�locations�(e.g.�in�northern�Egypt�in�the�south�of�Cairo)
•�Contribution�towards�purchases�of�IT�equipment
•�Training�assistance�and�support�with�recruitment.
Egypt
Size of the country 1,001,450 sq. kms.
Population 81.7 million (2008)
Capital Cairo
Currency Egyptian Pound (EGP)
1 USD = EGP (average) 5.19 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 404.3 billion (2007)
• GDP per capita in PPP: USD 5,320 (2007 est.)
• CPI: 9.5 percent (2007)
• Unemployment rate: 8.9 percent (2007)
• FDI stock per capita: USD 652 (2007)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BB+ / Stable / B
Ease of Doing Business Rank(2009)
114
Rigidity of Employment Index(2009)
27
Country Snapshot
1 www.eiu.com, various pages, December 2008
2 www.idsc.gov.eg, The Egyptian Cabinet Information and Decision Support Center website,December 2008
3 www.mcit.gov.eg, Ministry of Communication and Information Technology website, December2008
4 www.cairolive.com, Cairo Live, December 2008
5 AmCham Egypt, Ministry of Communications and Information Technology, Egypt’s ICT Strategy2007 – 2010
6 Business Today Egypt, India Outsources Outsourcing, 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Alexandria
Cairo
Damietta
92
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Cairo
Quick facts
GeographicLocation
Situated in the north of Egypt on the banks of the NileRiver. The air travel time between Cairo and London isabout 5 hours.
Time Zone GMT +0200
Climate
Hot desert climate, with average summer temperaturebetween 21 and 36 degrees Celsius and average wintertemperature between 8 and 18 degrees Celsius. Theaverage rainfall is 20 cm.
Population1 18.0 million
Literacy rate2 71.4 percent*
Languages Arabic, English
Major industriesTourism, textile, chemicals, leather, cement, foodproduction
1 Egyptian Census, 2006
2 www.amcham.org.eg/dbe/ICT.asp, AmCham: Doing Business in Egypt, 2008
3 www.orangepartner.com/site/enuk/news/press/p_inauguration_of_the_cairo_orange_labs.jsp,December 2008
4 EgyptNews.com, Oracle Egypt global support services center is officially opened, April 2008
5 Yankee Group Report, May 2007
Sources: 1 Egyptian Census, 2006. Data for Cairo Metropolitan Region 2 EIU* National level
Other sources: Ministry of Foreign Affairs, Egypt government
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Cairo’s workforce is proficient in Arabic and English, which makesthe city well suited to cater to the Middle-Eastern market as wellas English speaking countries
• A large, young population provides a huge talent pool to recruitfrom
• The workforce has a pro-Western attitude and high serviceorientation due to Cairo’s rich history and booming tourism industry
• The Egyptian government is keen to support foreign investments,and provides liberal assistance to the IT-BPO industry2
• The time-zone in Cairo favors business compatibility with marketsin the Middle East, Europe and the US
• Cairo offers a comparative cost advantage over cities in Europe.
City Introduction
•�Cairo�is�the�capital�of�Egypt�and�its�largest�city1
•�It�is�the�industrial�and�commercial�center�of�Egypt,�and�a�popular�internationaltourist�destination.
Key IT-BPO companies (Services offered)
IBM (Research center)Fujitsu Consulting (ITservices)
Xceed (Contact center)Wipro (Developmentcenter)
Oracle (Support center)Orange BusinessServices (Support center)
Sources: Company websites, Indiatimes Infotech article
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Cairo�witnessed�increased�activity�in�the�IT-BPO�sector�in�the�late�1990’s�
•�Currently,�Orange�Business�Services�(OBS)�employs�1,500�people�at�its�support�centerin�downtown�Cairo�supporting�clients�in�18�languages�including�Arabic,�English,�French,German,�Italian�and�Spanish3
•�In�2008,�Oracle�opened�a�global�support�center�employing�520�professionals�thatprovide�support�in�Arabic,�English,�French�and�Spanish4.
Industry Profile – Size and Specifics
•�The�majority�of�Egypt’s�offshore�outsourcing�revenue�is�earned�from�Cairo5
•�Services�sourced�from�Cairo�include�technical�support�call�centers,�softwaredevelopment�and�research�facilities.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
1 www.fci-cu.edu.eg, Faculty of Computers and Information website, December 2008
2 www.smart-villages.com/docs/cairo.aspx, Smart Villages Egypt website, December 2008
3 Airport Technology
4 Mazot is a remnant after extraction of more valuable fuel products from crude oil
5 KPMG Analysis based on news research
6 OSAC Egypt Crime and Safety Report, 2008
7 BBC News, Cairo rockslide death toll climbs, 8 September 2008
8 www.investinalexandria.gov.eg, Invest in Alexandria website, December 2008
9 Survey by GulfTalent.com
Human Resources
•�Cairo�is�an�educational�hub�for�Arabic�nations.�The�University�of�Cairo�is�one�of�the�biggest�in�Africa,�with�about�2,000�students�enrolledat�the�Faculty�of�Computers�and�Information1.�There�are�many�other�educational�institutions�including�the�German�University�with�aFaculty�of�Information�Engineering,�the�American�University,�the�Nile�University�specializing�in�IT�and�the�Higher�Technological�Institute,amongst�others
•�Cairo’s�educational�system�puts�a�premium�on�the�technological�knowledge.�There�are�also�state-financed�IT�training�programs,�certifiedby�multinational�IT�companies
•�There�is�a�large�pool�of�young�workforce�that�speaks�Arabic�as�well�as�English,�providing�a�multi-lingual�talent�pool.�However,competition�for�the�more�qualified�talent�is�high
•�The�well�developed�tourism�sector�presents�an�alternative�pool�of�employees�having�foreign�language�skills�and�service�sectororientation.
Infrastructure
•�Office space (IT Parks): The�Egyptian�government�is�constructing�“smart�villages”�to�attract�foreign�ICT�companies.�The�Giza�SmartVillage�in�Cairo�spread�over�3�million�sq.�mts.�opened�in�2003.�It�expects�to�house�more�than�120�companies�employing�20,000professionals�by�the�end�of�20082
•�Power supply: The�government�has�invested�heavily�in�the�electricity�grid�in�order�to�satisfy�the�strong�demand�in�Cairo�and�other�urbancenters.�The�government�is�encouraging�public-private�partnerships�to�expand�and�realize�electricity�capacity�and�reliability�effectively�inthe�near�future
•�Telecom Infrastructure: The�country�is�connected�to�the�international�telecommunication�infrastructure�by�three�major�submarine�fiber-optic�cables,�with�the�telecom�infrastructure�expected�to�be�extended�by�additional�submarine�fiber-optic�cables
•�National and International connectivity: Cairo�is�the�transportation�center�for�the�entire�Egyptian�transportation�network.�The�city’sinternational�airport�is�the�second�busiest�in�Africa�and�has�flight�connections�to�various�destinations�all�over�the�world3
•�Upcoming projects: A�new�Contact�Center�Park,�with�40�buildings�is�slated�to�come�up�in�Maadi�in�the�southeast�of�Cairo.�Companiescan�start�setting�up�operations�by�2009�while�the�Park�is�expected�to�become�fully�operational�by�2012.�The�Giza�Smart�Village�is�to�beexpanded�by�an�additional�78�hectares�including�5�new�buildings�totaling�10,000�sq.�mts.2 Completion�of�the�first�of�the�new�operationalbuildings�is�scheduled�for�March�2009.
State / city specific incentives for IT-BPO over and above country level incentives, if any
•�Local�government�is�eager�to�attract�foreign�investment�and�provides�beneficial�purchase�options�for�municipally�owned�land2.�
Quality of life
•�Cost of living: Cairo’s�cost�of�living�is�relatively�high�mainly�due�to�its�soaring�rate�of�inflation.�However,�the�city�ranked�101�in�Mercer’s2008�world�Cost�of�Living�Index�and�is�still�less�expensive�than�other�major�African�cities�like�Algier,�Lagos�or�Dakar
•�Crime rate: Cairo�is�considered�to�be�a�relatively�safe�place�to�live�and�work,�with�a�low�crime�rate6
•�Pollution levels: The�city�has�high�pollution�levels�because�its�industrial�activities�are�fuelled�by�heavy�oils�–�especially�mazot4.�Acommon�initiative�by�Egyptian�factory�owners�and�the�Climate�Change�Initiative�has�been�taken�to�introduce�a�new�technology�thatenables�a�switch�from�heavy�oils�to�natural�gas.�Already,�more�than�a�fourth�of�factories�in�the�region�run�on�natural�gas�leading�togradually�decreasing�air�pollution5
•�Ease of commuting: Cairo�has�an�extensive�road�network.�A�113�km�ring�road�interlinks�Cairo�with�highways�and�other�cities8.Furthermore,�the�city�has�a�rail�and�subway�system.�Despite�the�developments�of�the�city’s�infrastructure,�Cairo�is�the�second�mostcongested�city�in�the�Middle�East9
•�Availability of Hotels: Cairo�is�well�known�to�be�a�tourist�destination.�It�benefits�from�a�broad�supply�of�quality�accommodation,including�international�chains.
Risk: City specific
•�Catastrophic risks: Cairo�was�affected�by�a�severe�earthquake�in�1992.�The�city�does�not�lie�in�a�high�seismic�activity�zone,�butearthquakes�do�occur6.�Further,�In�September�2008,�over�100�people�were�killed�by�a�rockslide�at�the�outskirts�of�Cairo7
•�Political risks: Cairo�is�currently�assessed�as�relatively�high�risk�on�the�basis�of�random�acts�of�terrorism�and�political�violence6
•�History of Disruption: In�2005,�3�tourists�were�killed�during�a�terrorist�attack�in�Cairo’s�city�center6.
94
Mauritius
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure2
The�Republic�of�Mauritius�has�10�administrative�subdivisions.�The�legislature�consists�of�aunicameral�National�Assembly.�The�Mauritian�government�is�democratically�elected�every�fiveyears�and�its�constitution�is�based�upon�the�British�parliamentary�system.�The�President�is�thehead�of�state�and�Prime�Minister�is�the�head�of�government.�Four�parties�have�formed�a�coalitiongovernment�named�Alliance�Sociale�(AS).�The�next�elections�are�due�in�2010.�
Business and Investment ClimateForeign Direct Investment (FDI): FDI�inflows�have�increased�significantly�for�the�past�2�yearsand�accounted�for�USD�339�million�in�2007.�Compared�to�the�previous�year,�FDI�inflows�havemore�than�tripled�(USD�105�million�FDI�inflows)3.
GDP growth: Real�GDP�grew�by�5.6�percent�in�2007.�The�EIU�forecasts�GDP�to�grow�at�the�samerate�in�2008�and�in�20091.
Inflation: After�inflation�rose�to�10.1�percent�in�April�2008,�it�is�expected�to�fall�to�about�7�percentin�20091.
IT-BPO Scenario in the countryWith�an�average�growth�rate�of�25�percent�from�October�2006�to�March�2007�the�IT-BPO�industryis�the�fastest�growing�sector�of�Mauritius'�economy.�In�total,�there�are�255�IT-BPO�companiesemploying�about�10,000�people.�In�2007,�the�IT-BPO�sector�contributed�to�5.7�percent�of�theGDP4.
A�majority�of�the�companies�provide�BPO�and�call�center�services�and�one�fifth�are�involved�insoftware�development4.�International�companies�operating�in�Mauritius�include�Microsoft,Hinduja,�Oracle,�Infosys�and�CISCO.
The�government�has�developed�a�national�strategic�plan�that�aims�at�transforming�the�country�intoan�ICT�hub.�An�increase�of�employment�to�29,000�qualified�persons�in�the�ICT�sector�is�targeted,including�more�than�10,000�foreigners.�Furthermore,�the�government�intends�to�attract�twice�thenumber�of�foreign�investors�by�20115.
Most�companies�operate�in�Port�Louis.�The�Grand�Baie�Business�Park,�the�newly�developed�RoseBelle�Business�Park,�La�Tour�Koenig�Informatics�Park,�Goodlands�Business�Park�and�the�Trade�andMarketing�Center�are�some�of�the�important�knowledge�parks�of�the�country6.
Mauritius�is�positioning�itself�as�an�attractive�international�financial�services�center�encouragingseveral�outsourcing�companies,�especially�Indian,�to�set�up�holding�offices�in�the�country.
Government incentives4
The�country�has�a�liberal�fiscal�regime�which�reflects�the�government’s�eagerness�to�attractforeign�investors.�Investment�incentives�for�IT-BPO�include:
•�Corporate�tax�exemption�(2�options�are�available:�0�percent�in�the�first�year�and�15�percent�thefollowing�years�or�5�percent�in�perpetuity)
•�Zero�customs�duty�on�ICT�equipment
•�Fifty�percent�tax�relief�on�personal�income�tax�for�foreign�IT�specialists
•�Refund�of�up�to�75�percent�of�training�costs.
Furthermore,�companies�operating�in�Mauritius‘�Export�Processing�Zone�benefit�from�tax�andcustoms�duties�exemptions�as�well�as�registration�fee�reductions.
Mauritius
Size of the country 2,040 sq. kms.
Population 1.22 million (2007 est.)
Capital Port Louis
Currency Mauritian Rupee (MUR)
1 USD = MUR (average) 27.07 (2008)
Main macroeconomic indicators1:
• GDP in PPP: USD 14.27 billion (2007 est.)
• GDP per capita in PPP: USD 11,300 (2007 est.)
• CPI: 8.8 percent (2007 est.)
• Unemployment rate: 8.8 percent (2007 est.)
• FDI stock per capita: USD 89 (2007 est.)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
Not available
Ease of Doing Business Rank(2009)
24 (2009)
Rigidity of Employment Index(2009)
23 (2009)
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008
2 The Essence of Africa.com tourism website, December 2008
3 UNCTAD, World Investment Report 2008
4 Board of Investment, Mauritius 2008
5 Republic of Mauritius National ICT Strategic Plan 2007-2011
6 www.investmauritius.com/Resources1.aspx, Business Parks of Mauritius Limited, andRepublic of Mauritius Business Portal, December 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com,Central Central Statistics Office Mauritius
Sources: www.eiu.com, World Bank
Emerging Destination
Port Louis
96
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Port�Louis
Quick facts
GeographicLocation
Situated in the west of the Island, it can be reached withinfour hours from Johannesburg
Time Zone GMT +0400
Climate
Subtropical climate, with summer temperature rangingbetween 23 and 30 degrees Celsius and winter temperaturebetween 17 and 24 degrees Celsius. Annual rainfall rangesfrom 90 to 150 cm.
Population1 130,050
Literacy rate2 86 percent*
Languages3 English (official language), French Creole
Major industries4 Sugar, textile, tourism, ICT
1 www.investmauritius.com/Resources1.aspx, Board of Investment, Mauritius, December 2008
2 KPMG estimates based on: 'List of Operational ITES-BPO Companies as at September 2008’,by Board of Investment Mauritius
3 Embassy of the United States: Country Commercial Guide Mauritius, December 2008
4 www.accenture.com, Accenture website, December 2008
5 www.allbusiness.com/real-estate/commercial-residential-property-commercial/10594708-1.html, Allbusiness article, 2008
6 www.scar.utoronto.ca/~gwater/IAHCGUA/UGD/port-louis.html, Urban GroundwaterDatabase, December 2008
7 Continuity Central News article, Mauritius recovery centre being developed, 10 December2008
USD / MUR exchange rate at 20.11.2008 has been utilized for conversions
Sources: 1 Central Statistics Office Mauritius (2007 est.) 2 CIA Factbook
Other Sources: Travel websites* National level
Key drivers for the city to emerge as a favorable IT-BPOdestination
• The cultural affinity with Europe and Asia, and the availability of abilingual workforce make Port Louis an attractive destination forEuropean and Asian customers
• The city is a major tourist destination and has a good serviceorientation
• Even though many Mauritian students study abroad, most of themreturn after graduating, forming an attractive talent pool for IT-BPOcompanies
• Immigration by qualified workforce is encouraged by the Port Louisgovernment. Work permits are provided within a short time periodfor foreign employees
• The city is considered attractive for disaster recovery centers
• Supportive government policies that encourage foreign investment,and well developed infrastructure, especially in telecom, has aidedthe growth of the BPO segment
• Mercer’s 2008 Quality of Living Survey has rated Port Louis as oneof the best cities in the Middle East and Africa region.
City Introduction
•�Port�Louis�is�the�capital�city�of�Mauritius
•�It�is�the�main�port�of�the�country6.
Key IT-BPO companies (Services offered)
Microsoft (IT services) CISCO (ICT services)
Oracle (IT services)Accenture (IT-BPOservices)
Infosys (Disaster recoverycenter)
Orange BusinessServices (BPO services)
Sources: Company websites, ICT and BPO in Mauritius –National Computer Board
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�With�the�establishment�of�the�National�Computer�Board,�State�Informatics�Ltd.�and�theCentral�Informatics�Bureau�in�late�’80s,�the�IT-BPO�sector�has�experienced�rapiddevelopment�and�has�become�very�export-oriented
•�Companies�are�looking�at�Port�Louis�as�a�disaster�recovery�center7
•�In�1997,�Microsoft�opened�its�regional�office�in�the�city�to�serve�the�Indian�Oceanregion3.�Accenture�services�its�European�and�US�clients�from�its�center�in�Port�Louis4
•�According�to�the�BPO�Secretariat,�by�October�2005,�there�were�90�companiesemploying�3801�people�in�the�BPO�sector.�Call�centers�employed�2,071�of�theseprofessionals.
Industry Profile – Size and Specifics
•�Total�investments�in�the�IT-BPO�sector�until�March�2007�accounted�for�USD�47�million1
•�Over�150�BPO�companies�are�located�within�a�15�km�radius�of�Port�Louis2
•�The�Ebene�Cyber�City�Park�houses�global�players�such�as�Orange,�lnfosys,�Infinity�BPO,Tele-forma�and�Hua�WeI5
•�A�host�of�services�are�offered�out�of�Mauritius�including�call-center,�financial�services,software�development,�website�development,�animation�and�multimedia�services,�ITconsulting,�e-Learning�and�ICT�training.
97
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Mauritius�has�a�large�pool�of�educated�and�young�people.�Almost�one�third�of�the�country‘s�population�is�less�than�30�years�old1
•�There�are�about�94�educational�institutes�in�Mauritius2.�Information�technology,�management,�commerce�and�engineering�are�the�mostpopular�courses�in�the�country�
•�Almost�4,000�students�graduate�annually�from�the�University�of�Technology�and�University�of�Mauritius�in�IT-related�subjects3.�In�order�toenhance�the�existing�pool�of�human�resources�the�government�is�encouraging�international�tertiary�education�institutions�to�invest�inPort�Louis1
•�Given�the�small�size�of�Mauritius,�most�graduates�can�be�available�to�work�in�the�city�of�Port�Louis
•�The�country�has�among�the�highest�literacy�rates�in�Africa�and�benefits�from�a�free�education�system8.�Furthermore,�IT-BPO�companiescan�benefit�from�the�workforce’s�bilingual�language�capabilities�in�English�and�French1.�
Infrastructure
•�Office space (IT Parks): The�Ebene�Cyber�City�Park�is�one�of�the�main�locations�for�IT-BPO�companies�and�is�located�about�15�minutesby�road�from�Port�Louis.�The�Cyber�City�totals�60,000�sq.�mts.�of�space�and�includes�a�business�and�knowledge�zone,�commercial,residential�and�hotel�facilities.�The�towers�in�Cyber�City�provide�benefits�for�ICT�players�such�as�first�layer�access�to�the�SAFE4�opticfiber�cable�and�reliable�electrical�power�supply
•��Infrastructure: Port�Louis�has�a�well�developed�digital�network�infrastructure�and�telecommunication�facilities.�Mauritius�is�connected�toa�submarine�fiber�optic�cable�system�linking�Mauritius�directly�with�Europe�and�Asia11,�and�supporting�the�positive�development�of�theICT�sector�in�the�country
•�National and International connectivity: The�Sir�Seewoosagar�Ramgolam�International�Airport�provides�direct�flights�to�destinations�inEurope�(�including�Geneva,�Paris�and�London),�Asia�(including�Singapore,�Mumbai�and�Hong�Kong),�Australia,�Middle�East,�Africa�and�theIndian�ocean�islands�(including�Seychelles�and�Reunion)13
•�Upcoming projects: Further�international�fiber�optic�cables�are�being�laid.�Due�to�the�high�demand,�there�are�plans�to�build�anothertower�in�the�Ebène�Cyber�City�Park�in�2009.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�The�country�is�very�small�thus�there�are�no�local�investment�incentives�provided.�However,�Mauritius’�Cyber�City�provides�tax�exemptionscomparable�to�the�Mauritian�Export�Service�Zones5.
Quality of life
•�Cost of living: Cost�of�living�is�relatively�high�compared�to�African�states�given�Mauritius’�location�and�the�need�to�import�many�goods.Being�an�attractive�holiday�destination�and�investments�by�numerous�foreigners�have�also�led�to�increased�costs�of�living
•�Crime rate: Mauritius�has�one�of�the�lowest�crime�rates�in�Africa9
•�Pollution levels: Air�pollution�is�generally�low,�but�the�city�faces�a�problem�of�water�pollution10
•�Ease of commuting: It�is�convenient�to�travel�by�bus,�car�or�taxi�around�the�island.�The�Mauritian�island�benefits�from�a�dense�networkof�roads:�more�than�2000�km�cover�the�1,865�sq.�kms.�island�which�facilitates�easy�commuting12
•�Availability of Hotels: Mauritius�is�known�as�a�holiday�destination�and�is�an�attractive�place�to�work�and�live.�Over�1,000�hotels,including�international�hotel�chains,�offer�good�quality�accommodation�in�Mauritius.�
Risk: City specific
•�Catastrophic risks: Since�the�island�is�surrounded�by�reefs,�it�is�prone�to�maritime�hazards�such�as�cyclones,�especially�betweenNovember�and�May6
•�Political risks: There�are�no�major�political�risks�to�be�expected.�In�2007�and�2008,�the�island�was�ranked�first�in�the�Ibrahim�Index�ofAfrican�Governance7.
1 www.investmauritius.com/Resources1.aspx, Board of Investment, Mauritius, December 2008
2 Colleges and Universities directory, African Business May 1, 2008
3 www.investmauritius.com/Resources1.aspx, Board of Investment, Mauritius, December 2008
4 SAFE or South Africa Far East cable is an optical fiber submarine communications cable
linking Melkbosstrand, South Africa to Penang, Malaysia
5 www.e-cybercity.mu, CyberCity Mauritius website, December 2008
6 www.fco.gov.uk, Foreign & Commonwealth office, UK, December 2008
7 MO Ibrahim Foundation Press Release (The Ibrahim ranking compares sub-Saharan African
countries considering the safety and security, human and economic development,
transparency and corruption as well as human rights)
8 Infoplease Country profile, Mauritius, December 2008
9 Crime and Society, San Diego State University / Mauritius Crime Survey 2004
10 CIA The World Factbook, Mauritius, December 2008
11 www.ifsmauritius.com/mauritius.htm, IFS Mauritius website, December 2008
12 Nation Master Transportation Statistics, 2008
13 SADC Investment Review 2007-08 98
Northern Ireland (UK)
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Northern�Ireland�is�one�of�the�four�constituents�of�the�United�Kingdom�(UK).�Certainexecutive�and�legislative�responsibilities�have�partly�been�delegated�to�the�Northern�Irelandassembly.�Eighteen�members�represent�Northern�Ireland’s�interests�in�the�UK�Parliamentand�3�members�in�the�European�parliament.�A�government�is�in�place�consisting�both�ofunionist�(in�favor�of�continuing�as�a�part�of�the�UK)�and�nationalist�parties�(in�favor�ofindependence�from�the�UK).
Business and Investment ClimateForeign Direct Investment (FDI): Northern�Ireland�has�attracted�over�700�foreign�investorsemploying�70,000�people.�Most�investments�have�been�focused�on�the�greater�Belfastarea.�In�2006-07,�around�9�percent�of�all�FDI�to�the�UK�was�secured�by�Northern�Ireland2.
GDP growth: Northern�Ireland’s�economy�has�grown�steadily,�its�real�GDP�growth�was�3.5percent�in�2007.�GDP�growth�is�expected�to�drop�to�1.8�percent�in�2008�which�is�mainly�aresult�of�the�financial�crisis�and�the�UK’s�dependence�on�the�financial�sector�as�a�maineconomic�driver2.
Inflation: Northern�Ireland�enjoys�a�stable�inflation�rate�based�on�the�Harmonized�Index�ofConsumer�Prices.�In�2007,�it�was�2.4�percent2.�
IT-BPO Scenario in the countryNorthern�Ireland�has�been�successfully�attracting�ICT�investments.�Statistics�show�that11,200�IT�personnel�work�for�more�than�723�ICT�companies,�whereof�more�than�100�areinternational�investors2.
Furthermore,�there�are�more�than�70�contact�and�shared�service�centers�in�Northern�Irelandemploying�an�additional�10,000�people2.
Liberty�IT�Allstate,�HBOS,�British�Telecom,�Nortel�Networks�Ltd,�Openwave,�Skillsoft,�AllenSystems�Group�and�Goodrich�have�invested�in�software�operations�in�Northern�Ireland.
Major�international�investors�in�the�financial�services�sector�include�Halifax,�Abbey,�HMLand�Northbrook�Technology�and�Citigroup.
Teletech�and�HCL�have�BPO�locations�and�Stream�International�operates�a�technical�supportcenter�in�Northern�Ireland.
Government incentives2
Northern�Ireland’s�government�aims�at�attracting�foreign�investors�and�provides�cash�andtraining�grants�depending�on�the�number�of�newly�jobs�created.
•�Recent�investment�projects�benefited�from�15�to�25�percent�capital�grants�according�toNorthern�Ireland’s�investment�promotion�agency.�Additionally,�around�USD�7,450�to�USD22,340�per�created�job�are�available�depending�on�required�pre-employment�training.However,�the�maximum�amount�of�capital�grants�provided�is�30�percent�of�eligible�costs
•�Research�and�development�capital�spending�can�be�written�off�against�income
•�There�are�research�and�development�tax�reliefs�between�130�percent�(companies�withmore�than�500�employees)�and�175�percent�(companies�employing�less�than�250employees)�available.
Northern�Ireland�(UK)
Size of the country 14,139 sq. kms.
Population 1.7 million (2007)
Capital Belfast
Currency British Pound (GBP)
1 USD = GBP (average) 0.53 (2008)
Main macroeconomic indicators:
• GDP in PPP: USD 2,137 billion (2007)*
• GDP per capita in PPP: USD 28,431 (2007 est.)
• CPI: 2.4 percent (2007 est.)
• Unemployment rate: 4.1 percent (2007 est.)
• FDI stock per capita: USD 21,124 (2007)*
2008 (Rating/outlook)*
EIU’s Sovereign Risk Rating AA / Stable
Standard & Poor’s ForeignCurrency Risk Rating
AAA / Stable / A-1+
Ease of Doing Business Rank(2009)
6
Rigidity of Employment Index(2009)
14
Country Snapshot
1 www.niassembly.gov.uk, Northern Ireland Assembly website, December 2008
2 www.investni.com/index/locate/doing_business_in_Northern_ireland_/attractive_support_packages.htm, Invest in Northern Ireland website, December 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com,Department of Enterprise Trade and Investment, NorthernIreland Statistics and Research Agency
Sources: www.eiu.com, World Bank, Standard & Poor’s*UK country level
Emerging Destination
*UK country level
Belfast
100
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Belfast
Quick facts
GeographicLocation
Located on the east coast of Northern Ireland, it can beaccessed within an hour by air from London
Time Zone GMT 0000
Climate
Temperate climate, with summer temperature rangingbetween 11 and 18 degrees Celsius. The wintertemperature varies between 2 and 6 degrees Celsius. Theaverage annual rainfall is 84.6 cm.
Population1 267,374
Literacy rate1 99 percent*
LanguagesEnglish, Irish Gaelic; Spanish and French spoken amongstudents
Major industriesICT, life sciences, biotechnology, shared services, financialservices
1 www.goireland.com, Go Ireland website, December 2008
2 www.belfastcity.gov.uk/investinbelfastguide/belfastinbrief.asp?menuitem=belfast,Investment Belfast website, December 2008
3 www.investni.com, Invest Northern Ireland website, various pages, December 2008
4 www.investni.com/us_nortel.pdf, Nortel Network Business Profile, 2008
5 Economic Times, Firstsource to create 800 jobs in N Ireland, 3 May 2008
6 www.belfastcity.gov.uk, Belfast City Council, December 2008
7 Fidessa company website, News archive, 19 February 2008
Sources: 1 Belfast City Council (2006)*National level
Other Source: Investment Belfast website
Key drivers for the city to emerge as a favorable IT-BPOdestination
• The education system in Belfast is renowned and the universitieshave good research and development facilities which supportsbusinesses and the industry
• Belfast benefits from a young population (with 46 percent beingunder the age of 302), high literacy rates and a large pool of ITgraduates
• Expansion in quality office space is underway and the city benefitsfrom good infrastructure
• Belfast, according to a recent report by OCO Consulting, is said tohave the second highest ranking in the UK for attracting FDI3
• The city serves as a favorable near-shore destination and caters tothe UK and Western European markets
• Belfast has a competitive operating cost advantage. A study byIBM indicates Belfast to be 32 percent lower on operating coststhan other UK locations2.
City Introduction
•�Belfast�is�the�capital�city�of�Northern�Ireland
•�It�is�the�second�largest�city�on�the�island�of�Ireland1.
Key IT-BPO companies (Services offered)
Nortel Networks(Research anddevelopment center)
Citi (Technology centre)
BT (Software engineeringservices)
Microsoft (IT services)
HCL Technologies (BPOservices)
Infotech (IT and BPOservices)
Sources: Company websites, Belfast City Council Guide, newsarticle at silicon.com
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Belfast’s�IT-BPO�sector�has�grown�rapidly�during�the�past�decade.�Nortel‘s�softwaredevelopment�center�has�been�established�since�over�a�decade,�and�BT�was�among�thefirst�call�centers�in�the�city4
•�In�2004,�Citi�established�a�Technology�Centre�of�Excellence�in�Belfast.�Having�expandedin�July�2008,�Citi�employs�more�than�850�people�in�Belfast2
•�In�2008,�Fidessa,�a�financial�markets�software�and�services�company,�set�up�adevelopment�center�for�the�international�market�in�Belfast�employing�26�programmers7
•�US�and�India-based�IT-BPO�companies�are�among�the�major�investors
•�HCL�Technology,�Tech�Mahindra,�Firstsource�and�Polaris�have�invested�USD�300�millionand�created�3,500�jobs�in�the�city5.�Other�investors�are�Microsoft,�Infotech�andAllstate.
Industry Profile – Size and Specifics
•�Belfast�has�positioned�itself�as�an�attractive�location�for�IT�and�BPO�companies�inEurope
•�In�total,�there�are�more�than�70�ICT�companies�located�in�the�city�and�its�surroundingarea�employing�about�7,000�people6
•�Services�outsourced�from�Belfast�include�HR,�Software�development,�testing,�callcenter�and�IT�support.�
101
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Belfast�has�2�universities�(University�of�Ulster�and�Queen’s�University,�Belfast)�educating�a�large�talent�pool�of�almost�48,000undergraduate�and�more�than�7,000�postgraduate�students1
•�In�2006-2007,�more�than�18,600�students�were�enrolled�in�IT-related�fields1
•�Given�high�standards�of�education,�research�and�knowledge�transfer,�Queen’s�University�Belfast�ranks�high�in�electronic�engineeringareas,�especially�the�Institute�of�Electronics,�Communications�and�Information�Technology
•�Labor�cost�in�Belfast�is�15�percent�lower�than�the�UK�average2
•�Today,�more�than�one�fifth�of�Belfast’s�population�is�less�than�16�years�old3.�This�could�ensure�the�availability�of�skilled�entry-levelworkforce�in�the�medium-term�and�provides�an�advantage�over�Western�European�locations�where�overall�demographic�trends�have�anegative�impact�on�the�availability�of�human�resources.
Infrastructure
•�Office space (IT Parks): The�availability�of�grade�A�office�space�in�the�city�center�fell�by�45�percent�in�2007.�There�is�a�supply�of�20,000sq.�mts.�that�represents�a�vacancy�rate�of�2.7�percent4
•�Telecom Infrastructure: Belfast�benefits�from�a�reliable�and�fully�fiber�telecom�infrastructure�based�on�SDH�technology�and�a�100percent�broadband�coverage7
•�National and International connectivity: Belfast�has�two�airports�located�within�20�minutes�driving�distance�to�the�city�center:�BelfastInternational�Airport�and�George�Best�Belfast�City�Airport�offer�regular�flights�to�London,�Manchester,�Edinburgh,�Paris,�Berlin,�New�Yorkand�various�destinations�in�North�America�and�Europe2
•�Upcoming projects: Total�new�office�completions�for�2009�are�estimated�to�be�21,000�sq.�mts5.�The�Northern�Ireland�Science�Park,which�offers�more�than�10,000�sq.�mts.�of�business�space�for�high-tech�companies�is�said�to�go�in�for�an�expansion�plan�within�the“Concourse�Project”.�Completion�is�scheduled�for�20107.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�There�are�no�major�investment�incentives�offered�on�the�city�level.
Quality of life
•�Cost of living: Cost�of�living�is�relatively�low�compared�to�other�UK�cities.�Belfast’s�cost�of�goods,�services�and�rented�accommodationis�almost�40�percent�lower�compared�to�Dublin6
•�Crime rate: Compared�to�many�other�cities�in�the�United�Kingdom,�Belfast�is�considered�to�be�relatively�safe.�In�the�last�few�years,�thecrime�rate�went�down�by�8�percent�annually,�attributed�to�an�increased�police�presence1
•�Pollution levels: Use�of�natural�gas�fuels,�Belfast’s�smoke�control�program�and�the�closure�of�the�West�Belfast�power�station�in�2002have�contributed�to�reduced�pollution�levels�within�the�city
•�Ease of commuting: Belfast�has�a�well-organized�public�transport�network�connecting�the�city�center�with�the�suburbs.�The�city�plans�tospend�USD�154.5�million�for�the�modernization�of�Northern�Ireland’s�busiest�road�–�the�Westlink�-�providing�access�to�the�Port�of�Belfast,Belfast�City�Centre�and�Belfast�City�Airport1
•�Availability of Hotels: There�is�a�healthy�supply�of�quality�hotel�accommodation�in�Belfast.�More�than�40�hotels�in�the�city,�includinginternational�hotel�chains�provide�more�than�3,000�rooms.
Risk: City specific
•�Catastrophic risks: The�city�is�prone�to�floods.�The�last�major�floods�were�reported�in�August�20088
•�Political risks: Final�steps�to�ensure�peace�in�the�long�run�have�been�undertaken.�Confessional�separation�(Catholic�and�Protestant)�isstill�common�in�daily�life.�The�Irish�Republican�Army’s�(IRA)�disarmament�and�a�common�government�of�Catholic�Republicans�andProtestant�Unionist�have�greatly�contributed�to�the�political�stability�within�the�country.
1 www.belfastcity.gov.uk, Belfast City Council, December 2008
2 www.belfastcity.gov.uk/investinbelfastguide/belfastinbrief.asp?menuitem=belfast,Investment Belfast website, December 2008
3 Northern Ireland Research and Statistics Agency, 2008
4 Colliers CRE, Belfast Office space, 2008
5 CB Richard Ellis, November 2007
6 Mercer International, Annual Cost of Living Index, 2008
7 Broadband Northern Ireland – Department of Enterprise Trade and Investment website,December 2008
8 BBC News, Thousands face Belfast flood risk, November 2008 102
Poland
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
The�Republic�of�Poland�consists�of�16�provinces�(voivodships).�The�legislature�is�a�bicameralNational�Assembly�with�the�lower�house�–�Sejm�and�upper�house�-�Senat.�The�President�isthe�head�of�the�state,�and�the�Prime�Minister�is�the�head�of�the�government.�The�politicalparties�in�Parliament�are:�civic�platform,�law�and�justice,�left�and�democrats�and�the�PolishPeople's�Party.�The�next�national�elections�are�expected�to�be�held�in�October�2010(presidential)�and�October�2011�(parliamentary).�Poland�is�a�member�of�the�EU,�NATO�andOrganisation�for�Economic�Co-operation�and�Development�(OECD).
Business and Investment ClimateForeign Direct Investment (FDI): FDI�inflows�into�Poland�have�constantly�increased�for�thelast�few�years�to�USD�23�billion�in�2007,�however�FDI�is�expected�to�decrease�starting�from2008�(USD�20�billion)1.
GDP growth: Real�GDP�growth�in�Poland�was�6.7�percent�in�2007.�It�is�expected�to�fall�toabout�5.3�percent�in�FY�20081 due�to�the�economic�slowdown.
Inflation: Price�inflation�has�increased�to�4.3�percent�in�2008�mainly�due�to�higher�food�andoil�prices�as�well�as�pressure�from�the�labor�market.�EIU�estimates�inflation�at�3.8�percentin�20091 .
IT-BPO Scenario in the countryPoland’s�IT�outsourcing�market�today�is�the�fourth�largest�in�Central�and�Eastern�Europewith�a�market�value�of�approximately�USD�310�million2.�There�are�about�400�IT�outsourcingcompanies�located�in�the�country�employing�7,800�IT�specialists2 .
HP,�IBM,�Volvo,�GlaxoSmithKline�are�few�of�the�biggest�IT�shared�services�centers�inPoland5.�The�largest�Polish�IT�company,�Prokom�Software�SA,�has�its�headquarters�inGdynia,�near�the�city�of�Gdansk.
The�development�of�Krakow�and�Wroclaw�as�established�IT-BPO�destinations�has�led�toincreased�competition�for�qualified�and�foreign�language-speaking�workforce.�The�focus�hasthus�shifted�to�emerging�cities�like�Gdansk�and�Szczecin.
The�Polska�Izba�Informatyki�i�Telekomunikacji�is�the�association�representing�the�IT-BPOindustry�in�the�country.6
Government incentives3
The�Polish�government�provides�a�variety�of�incentives�to�the�IT-BPO�industry.�However,�ithas�become�more�restrictive�and�selective�with�respect�to�providing�incentives.
•�Tax�exemptions�are�possible�in�SEZs�
•�Customs�duty�exemption�on�imported�software,�and�on�hardware�for�100�percent�exportoriented�projects
•�Discretionary�cash�grants�are�generally�only�available�for�large�projects�with�significantinvestment�and�employment.
Poland
Size of the country 312,679 sq. kms.
Population 38.5 million (2007)
Capital Warsaw
Currency Polish Zloty (PLN)
1 USD = PLN (average) 2.28 (2008)
Main macroeconomic indicators:1
• GDP in PPP: USD 621.8 billion (2007)
• GDP per capita in PPP: USD 16,310 (2007)
• CPI: 4.0 percent (2007)
• Unemployment rate:12.8 percent (2007 est.)
• FDI stock per capita: USD 4,060 (2007 est.)4
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
A- / Stable / A-2
Ease of Doing Business Rank(2008)
76
Rigidity of Employment Index(2009)
37
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 20082 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 20073 www.paiz.gov.pl, Polish Information and Foreign Investment Agency website, December 20084 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, East
and Southeast Europe, June 20085 www.paiz.gov.pl/index/?id=22c5a901070d1c2ad33e821d071ae97e, Polish Information andForeign investment Agency website, December 20086 www.piit.org.pl, PIIT website, December 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Gdansk
Szczecin
Wroclaw
Warsaw
Krakow
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Gdansk
Quick facts
GeographicLocation
Situated in north Poland on the Baltic Coast, it can bereached from Warsaw in about an hour by air
Time Zone GMT +0100
Climate
Temperate maritime climate, with average summertemperature of 20 degrees and average winter temperatureof 5.5 degrees Celsius. The average annual rainfall is about60 cm.
Population1 458,053
Literacy rate1 99.8 percent*
Languages Polish, English, German, Russian
Major industries2 Maritime, high-tech, logistics, tourism, petrochemicals,cosmetics
1 World Port Source website Port of Gdansk, December 2008
2 www.euroffice-services.eu, Euro-Office Services website, December 2008
3 www.europoland.com/e_home.php , Europoland Tourist center website, December 2008
4 www.lhsystems.pl/english/company/index.html, Lufthansa Systems website, December 2008
5 www.paiz.gov.pl, Polish Information and Foreign Investment Agency website, December 2008
6 Statistical Office Gdansk, December 2008
*exchange rate at 20.11.2008
Sources: 1 CIA Factbook 2 New World Encyclopedia* National level
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Gdansk has a well educated population and houses the oldest andsecond largest technical university in the Pomerania region2
• The talent pool versed in multiple languages, is suited to provideservices in English, German, Russian, etc.
• The city has many research and development institutions, andthese skills are being tapped by companies to set up research anddevelopment centers in Gdansk
• Progressive policies, and a good standard of living make the city anattractive place to live and work
• The city is a tier II expansion option for companies with centers inthe Polish cities of Warsaw and Krakow
• Gdansk has a near-shore advantage to service the Europeanmarkets due to the similar time-zone
• Gdansk is to co-host the European Football Championship in 2012,due to which several infrastructure improvement projects havebeen planned3.
City Introduction
•�Gdansk�is�the�capital�of�the�Pomeranian�Voivodship�(province)
•�It�is�one�of�the�largest�metropolitan�areas�in�Poland�and�Poland’s�majorseaport1.
Key IT-BPO companies (Services offered)
Lufthansa Systems (ITservices)
Compuware (Researchand development center)
Intel Technology(Research anddevelopment center)
Zensar (IT services)
Young Digital Plan(Software development)
Reuters (Datamanagement center)
Sources: Polish Information and Foreign Investment Agency,Lufthansa Systems Poland, Compuware, Memorandum of theGdansk metropolitan area
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Early�movers�include�Lufthansa�Systems�which�established�its�center�for�remotemanagement�in�Gdansk�in�1998.�It�employs�a�team�of�over�200�IT�experts4
•�Intel�has�had�an�research�and�development�center�in�Gdansk�since�1999,�employingover�250�engineers�developing�software�and�hardware�communication�solutions5
•�In�2006,�Reuters�set�up�its�data�management�center�in�Gdansk�to�serve�the�EMAregion.�The�company�plans�to�employ�over�2,000�people�at�its�center5
•�Other�foreign�IT�companies�in�Gdansk�include�GE,�Compuware,�Moeller�Electric,�ZensarTechnologies�and�Young�Digital�Planet.
Industry Profile – Size and Specifics
•�Gdansk’s�overall�IT�industry�generates�USD�195�million*�revenue6
•�Approximately�2,000�people�are�employed�in�the�software�development�sector�in�thecity6
•�Key�activities�within�Gdansk’s�IT�industry�include�the�development�sector�in�the�ITindustry�integration�software,�multimedia�software,�research�and�development�andinternet�services.�
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•�Gdansk�is�home�to�renowned�universities�such�as�University�of�Gdansk�and�Gdansk�University�of�Technology.�Approximately�9,000students�are�enrolled�and�1,500�graduate�annually�in�IT,�electronics�and�telecommunication�in�the�Gdansk�region1
•�Robust�economic�growth�has�led�to�an�increase�in�salaries�in�Gdansk.�Despite�this�increase,�salaries�are�lower�than�other�Polish�citiessuch�as�Warsaw,�Wroclaw�and�Krakow11
•�Although�the�size�of�available�workforce�seems�limited�in�Gdansk,�employers�can�draw�on�talent�available�in�proximal�cities�like�Sopotand�Gdynia
•�The�strong�influx�of�foreign�investment�has�also�led�to�a�decrease�in�Gdansk’s�unemployment�rate.�Emigration�has�also�contributed�to�areduction�in�workforce�size,�although�the�exodus�of�Polish�workers�has�now�reduced
•�Employers�may�also�benefit�from�the�Polish�workforce’s�foreign�language�skills.�Spoken�foreign�languages�include�English,�Russian,German�and�French.
Infrastructure
•�Office space (IT Parks): Although�new�office�space�has�been�completed,�Gdansk’s�vacancy�rate�is�still�low�at�3.5�percent,�leading�toannual�growth�rates�for�rents�up�to�25�percent2.�Property�prices�are�amongst�the�lowest�in�Gdansk,�out�of�the�10�main�Polish�cities7.Established�in�2006,�Gdansk�Science�and�Technology�Park�located�in�the�Pomerania�Special�Economic�Zone�offers�investors�an�attractivebusiness�environment
•�Telecom Infrastructure: The�telecommunications�network�has�enjoyed�high�expenditure.�Modernization�of�the�telecommunicationinfrastructure�was�finalized�in�2003.�GTS�Energis,�a�communications�carrier,�connects�with�optical�fibers,�the�largest�Polish�cities,including:�Warsaw,�Krakow,�Katowice,�Gdansk,�and�Bydgoszcz8
•�National and International connectivity: Gdansk�Lech�Walesa�Airport,�Poland's�2nd�largest�airport,�offers�connections�with�Europeandestinations�and�Warsaw’s�Frederic�Chopin�airport�(which�has�direct�flight�connections�to�55�countries�worldwide9).�Four�internationalrailway�lines�connect�Gdansk�with�the�main�cities�and�industrial�centers�of�Poland
•�Upcoming projects: The�urban�development�of�the�“Young�City”�in�Gdansk’s�waterfront�is�expected�to�provide�750,000�sq.�mts.�ofusable�space�for�commercial,�residential,�entertainment�purposes.�This�is�Poland’s�largest�project�and�is�expected�to�be�developed�over12�years10.�The�road�network�is�not�yet�very�developed�but�four�new�road�transport�corridors,�including�a�north-south�route�goingthrough�Gdansk,�are�planned�and�are�partially�under�construction9.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�Although�there�are�no�investment�incentives�granted�by�the�local�government,�the�administration�is�pro-business.�The�State�providessupport�to�businesses�that�increase�employment�and�to�exporters.�The�local�governments�and�numerous�specialized�institutions�supportinvestors4.�
Quality of life
•�Cost of living: Cost�of�living�is�relatively�low�compared�to�other�Polish�cities.�Cost�of�housing�is�about�20�percent�lower�compared�toWarsaw3
•�Crime rate: According�to�a�survey�conducted�by�Wprost,�a�Polish�weekly,�Gdansk�ranked�fifth�on�the�list�of�Polish�cities�most�affected�bycrime
•�Pollution levels: EU�air�quality�standards�are�fulfilled�on�average.�Since�Gdansk's�bay�is�separated�from�the�Baltic�Proper�by�the�Helpeninsula�the�exchange�of�water�is�limited�leading�to�increased�maritime�pollution
•�Ease of commuting: Gdansk�region�has�good�road�and�railway�network�which�facilitates�commuting.�Buses�and�trams�are�available�forlocal�travel�within�the�city
•�Availability of Hotels: There�is�a�healthy�supply�of�quality�hotel�accommodation�in�Gdansk�around�the�year.�Gdansk�has�more�than�80tourist�accommodation�establishments�including�international�hotel�chains.
Risk: City specific
•�Catastrophic risks: Gdansk�is�one�of�the�most�flood�prone�areas�in�Poland5,�however,�it’s�well�protected�with�flood�protectioninfrastructure�such�as�dikes,�ditches,�culverts,�storm�gates,�pumping�stations�and�storage�reservoirs
•�History of disruptions: In�July�2001,�due�to�heavy�rain�the�embankment�of�Radunia�Channel6 was�breached�in�5�places.�Infrastructurelosses�in�Gdansk�amounted�to�USD�500�million�and�300�families�were�affected3.
1 www.gdansk.pl/en, City Hall of Gdansk website, December 2008
2 Cushman and Wakefield, 2008
3 KPMG Analysis from News Research
4 Memorandum of the Gdansk Metropolitan area, 2006
5 www.pgi.gov.pl/pgi_en/, Polish Geological Institute website, December 2008
6 The Radunia Channel runs parallel to the main road leading to Gdansk from the south
7 Property Focus: Investment Opportunity Gdansk, 2008
8 www.gts.pl, GTS Energis website, December 2008
9 www.paiz.gov.pl, Polish Information and Foreign Investment Agency website, December 2008
10 www.balticpropertytrust.com, Baltic Property Trust website, December 2008
11 Memorandum of the Gdansk Metropolitan Area, 2006
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Romania
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Romania’s�parliamentary�structure�is�bicameral�and�consists�of�the�Senate�(Upper�House)and�the�Chamber�of�Deputies�(Lower�House)�which�are�elected�for�a�four-year�term.�TheSenate�(upper�house)�has�137�seats�and�the�Chamber�of�Deputies�(lower�house)�has�332.The�head�of�state�is�the�President,�who�serves�a�five-year�term.�Romania�is�administrativelydivided�into�40�counties.�The�country�is�a�member�of�the�EU�since�January�2007.
Business and Investment ClimateForeign Direct Investment (FDI): Romania�has�become�a�very�popular�FDI�destination.�FDIinflows�into�Romania�amounted�to�USD�11.4�billion�in�2006�and�USD�9.4�billion�in�2007reflecting�large-scale�privatizations,�the�country’s�macroeconomic�stabilization�and�benefitsof�the�European�Union�accession.�As�large�privatizations�are�completed,�high�FDI�inflowsmay�decline�temporarily,�but�are�expected�to�remain�at�relatively�high�levels�in�the�mediumterm1.
GDP growth: The�Romanian�economy�has�been�expanding�and�real�GDP�grew�by�6�percentin�2007.�It�is�expected�to�rise�by�approximately�8.6�percent�in�2008�and�by�4.8�percent�in20091.
Inflation: Inflation�is�expected�to�average�7.8�percent�in�2008�and�decline�to�5.4�percent�in2009.�The�increase�in�inflation�in�2008�was�mainly�caused�by�growing�food�prices,�risingenergy�costs�and�rapid�wage�growth1.
IT-BPO Scenario in the countryThe�revenue�of�Romania’s�IT�outsourcing�industry�in�2007�was�USD�416�million2.�The�IToutsourcing�industry�comprises�around�600�companies�employing�close�to�12,500employees2.�Major�international�players�include�Microsoft,�Oracle,�HP,�SAP,�Huawei,�IBM,Ericsson,�Adobe�Systems�and�Infineon,�amongst�others3.�
The�offshore�ICT�industry�is�concentrated�in�and�around�Bucharest.�The�quick�developmentof�Bucharest�as�an�established�IT-BPO�location�has�led�to�high�competition�and�increasingsalaries.�As�a�result,�second�tier�cities�such�as�Brasov,�and�Cluj-Napoca�have�emerged�asalternative�locations.�
The�Information�Technology�&�Communication�Association�(ATIC),�Employers’�Association�ofthe�Software�and�Services�Industry�(ANIS)�and�the�Ministry�of�Communications�andInformation�Technology�are�the�IT�associations�of�the�country2.
Government incentives4
•�Companies�that�invest�more�than�USD�40�million�(EUR�30�million)�and�create�over�300new�jobs�can�theoretically�obtain�state�aid�of�up�to�50�percent�of�their�investment�inoutside�the�Bucharest-Ilfov�region�and�up�to�40�percent�in�the�capital�city.�However,�themaximum�amount�of�grants�offered�amounts�to�USD�28�million�(EUR�22.5�million)�in�theBucharest-Ilfov�region�and�USD�35.5�million�(EUR�28.1�million)�in�the�rest�of�Romania
•�Assistance�with�training�new�employees�is�possible�for�up�to�20�percent�of�the�employedpersonnel.�Grants�for�employing�recent�graduates�and�previously�unemployed�people�arealso�provided.
Romania
Size of the country 3,287,590 sq. kms.
Population 22.3 million (2007)
Capital Bucharest
Currency Romanian Leu (RON)
1 USD = RON (average) 2.54 (2008)
Main macroeconomic indicators:1
• GDP in PPP: USD 250 billion (2007 est.)
• GDP per capita in PPP: USD 11,430 (2007 est.)
• CPI: 4.8 percent (2007 est.)
• Unemployment rate: 3.6 percent (2007 est.)
• FDI stock per capita: USD 2,680 (2007 est.)5
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BB+ / Negative / B
Ease of Doing Business Rank(2008)
47 (2009)
Rigidity of Employment Index(2009)
62 (2009)
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 20082 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 20073 www.atic.org.ro, The Information Technology and Communications Association of Romania(ATIC) website, December 2008
4 www.arisinvest.ro, Romanian Agency for Foreign Investment website, December 20085 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Cluj-Napoca
Brasov
Bucharest
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Cluj-Napoca
Quick facts
GeographicLocation
Situated in north-western Transylvania in the valley of theSomesul Mic River, approximately 50 minutes by air fromBucharest.
Time Zone GMT +0200
ClimateContinental climate, with average summer temperature of18 degrees and average winter temperature of -1.9 degreesCelsius. The average annual rainfall is 59 cm.
Population1 310,243 (2007)
Literacy rate2 97.3 percent*
Languages Romanian, Hungarian, English, French, German
Major industriesIT, financial services, food processing, textile, woodprocessing, pharmaceuticals
1 www.clujonline.com/useful_information/reaching_cluj.htm, Cluj online, December 2008
2 www.proform-software.com/cj_ro_en.html, Proform Software website, December 2008
3 Romania.org website, December 2008
4 www.wirtek.com, Wirtek News Archive, 3 May 2006
5 www.zf.ro/zf-english, Ziarul Financiar news article, 2008
6 www.e-cat.ro, Centrul de Afaceri Transilvania Business Center website, December 2008
Sources: 1 National Institute of Statistics 2 CIA Factbook
* National rate
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Cluj-Napoca is an important financial and university center inRomania2
• In percentage terms, Cluj-Napoca’s has the largest student inRomania3. The city, therefore, benefits from a pool of qualifiedpersonnel
• The talent pool is versed in many languages, especially French andItalian, and is suited to provide multi-lingual services
• The talent pool in the city is also suited to offer research anddevelopment services
• The city has both, an established manufacturing as well as aservices industry. IT-BPO companies are tapping skills for productdevelopment and services
• The city is developing as a tier II alternative for companies withcenters in Bucharest in Romania
• The time-zone advantage makes the city suited to deliver near-shore services to Western Europe
• The country provides a relative cost advantage over other Westand East European cities.
City Introduction
•�One�of�the�major�Romanian�cities,�Cluj-Napoca�is�also�called�the�“TreasureCity”1
•�Cluj-Napoca,�the�capital�city�of�the�Cluj�County,�has�historically�been�one�ofRomania’s�academic,�cultural�and�commercial�hubs.�
Key IT-BPO companies (Services offered)
SISTEC (IT services) Brinel (IT services)
ISDC (Softwaredevelopment)
Genpact (BPO services)
Emerson (Engineeringservices)
Evalueserve (Researchand development center)
Sources: Company websites, Ziarul Financiar
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Cluj-Napoca�is�an�important�IT�hub�in�Romania.�The�city�is�being�considered�as�analternative�outsourcing�location�to�Bucharest,�due�to�increasing�competition
•�In�2006,�Wirtek,�a�software�outsourcing�company�based�in�Denmark,�acquired�CodeWizards�which�is�a�Cluj-Napoca-based�software�company�specializing�intelecommunications4
•�In�2007�Genpact,�a�business�and�technology�solutions�provider,�opened�its�second�BPOcenter�in�Romania,�at�Cluj-Napoca5
•�In�2008,�Evalueserve,�an�India-based�knowledge�process�outsourcing�company,�openedits�first�European�research�center�in�Cluj-Napoca5.�
Industry Profile – Size and Specifics
•�There�are�approximately�245�IT�companies�operating�in�the�Cluj�County�including�over100�software�companies�in�the�city�of�Cluj-Napoca6
•�The�services�offered�out�of�Cluj-Napoca�include�research�and�data�analytics,�ordermanagement,�finance�and�accounting,�engineering�services,�software�developmentand�IT�services.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•� Cluj-Napoca�is�an�important�academic�center�in�Romania.�The�city�is�home�to�two�prestigious�universities:�Babes-Bolyai�University�andTechnical�University�of�Cluj-Napoca�which�has�12,000�students1.The�large�number�of�students,�about�62,600�in�2007,�provides�a�steadyinflow�of�potential�entry-level�employees2
•� Employers�benefit�from�the�foreign�languages�skills�of�the�Romanian�workforce.�More�than�90�percent�of�Romanian�students�learnEnglish�in�high�school3.�Further,�a�large�number�of�Romanians�speak�Latin�languages�which�are�important�prerequisites�for�supportfunctions�for�Italy,�Spain�and�France
•� The�population�of�Cluj-Napoca�has�decreased�in�recent�years.�This�reflects�the�increased�concerns�that�after�Romania�entered�theEuropean�Union�in�2007,�young�skilled�specialists�may�seek�higher�paid�work�in�southern�EU�member�states�like�Italy�and�Spain.�
Infrastructure
•�Office space (IT Parks): In�2007,�the�area�of�“A�category”�office�space�available�in�Cluj-Napoca�was�20,150�sq.�mts.�With�increasingforeign�investment,�the�demand�for�quality�office�space�is�also�rising.�Thus,�in�2008,�five�new�mixed�real�estate�projects,�including�officespace,�would�be�launched.�This�is�likely�to�add�84,000�sq.�mts.�of�available�space4
•�Telecom Infrastructure: Due�to�increased�demand�for�high-quality�telecommunication,�the�telecom�infrastructure�is�currently�beingmodernized.�A�network�of�64,000�km�of�optical�fibre�is�currently�being�developed�in�Cluj-Napoca.�The�investment�accounts�for�anamount�of�approximately�USD�28�million7
•�National and International connectivity: The�city�has�a�well�developed�rail�and�road�network�and�is�crossed�by�the�European�RoadE60.�Cluj-Napoca�International�Airport,�which�is�the�third�largest�airport�in�Romania6,�offers�direct�flights�to�Timisoara�and�Bucharest�inRomania�as�well�as�various�destinations�across�Europe�including�France,�Germany,�UK,�Hungary,�Italy,�Austria,�Spain�and�also�to�Ukraineand�Moldavia
•�Upcoming projects: The�city�is�to�be�linked�with�Bucharest�and�the�Hungarian�border�by�“Autostrada�Transilvania”�(Romanian�MotorwayA3)�which�is�currently�under�construction.�The�415�km�highway�is�scheduled�for�completion�for�2013.�Several�real�estate�projects�arebeing�developed�in�Cluj-Napoca,�including�the�construction�of�a�10,000�sq.�mts.�business�center�in�the�middle�of�the�city.�Furthermore,�a26-storey�building�(Sigma�Tower)�with�83,7632�sq.�mts.�of�space�is�being�constructed7.�The�completion�of�the�Sigma�Tower�is�scheduledfor�2010.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�Local�authorities�can�provide�exemptions�on�local�tax�payments�on�land�and�buildings.
Quality of life
•�Cost of living: Cluj-Napoca�is�also�considered�to�have�high�living�standards.�Therefore,�the�cost�of�living�is�considered�to�be�highercompared�to�other�Romanian�cities5
•�Crime rate: Compared�to�other�Romanian�cities,�crime�rate�in�Cluj-Napoca�is�quite�low.�Crime�rate�has�continuously�been�falling�foralmost�a�decade�and�recent�polls�have�shown�a�high�degree�of�satisfaction�with�the�work�of�the�local�police5
•�Pollution levels: Air�pollution�levels�are�quite�high�in�the�city
•�Ease of commuting: The�city�has�a�transportation�network�including�tram�lines,�buses�and�trolleybuses.�However,�roads�are�congestedduring�rush�hours
•�Availability of Hotels: The�Cluj�County�offers�approximately�6,500�hotel�beds.�There�are�about�30�hotels�in�the�city�of�Cluj-Napocaincluding�some�western�standard�accommodation.
Risk: City specific
•�Catastrophic risks: Cluj-Napoca�is�prone�to�floods5
•�History of Disruption: Torrential�rain�destroyed�homes�and�affected�240�families�in�Coplean,�in�Cluj�county�in�July�20085.
1 www.e-cat.ro, Centrul de Afaceri Transilvania Business Center website, December 2008
2 www.cjcluj.ro, Consiljul Judetean Cluj website, December 2008
3 KPMG research based on local HR Agency information
4 REAS, Residential market in Romania, September 2008
5 www.romtradeconsult.com, Romtrade Consult website, December 2008
6 www.clujonline.com/useful_information/reaching_cluj.htm, Cluj online, December 2008
7 www.clujfo.ro/en/8/proiectul-cfo.html, Cluj Fiber Optic Integrator website, December 2008
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Russia
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Russia's�legislative�branch�is�a�bicameral�federal�assembly,�it�consists�of�the�State�Dumaand�the�Federal�Council.�The�State�Duma�has�450�members�that�are�elected�throughout�thecountry�based�on�population�of�the�districts.�The�Federal�Council�has�176�members,�2�eachelected�from�Russia's�89�territorial�units.�The�President�is�elected�for�a�four-year�term.�ThePrime�Minister�is�appointed�by�the�President,�who�in�turn�appoints�the�government.�InMarch�2008,�a�new�Russian�president�was�elected,�while�the�former�president�took�theposition�of�Prime�Minister.
Business and Investment ClimateForeign Direct Investment (FDI): FDI�inflows�into�Russia�accounted�for�USD�52.5�billion�in2007�and�are�expected�to�grow�to�USD�60�billion�in�20081.�The�strong�inflow�of�FDI�isexpected�to�continue�in�the�coming�years1.
GDP growth: Real�GDP�grew�by�7.2�percent�in�2007.�It�is�expected�to�remain�on�a�similarlevel�in�2008�and�slightly�decline�to�5.5�percent�in�20091.
Inflation: Inflation�is�expected�to�average�14.1�percent�in�2008.�Slowing�domestic�demandand�falling�commodity�prices�are�expected�to�help�to�reduce�inflation�to�the�expected�11.6percent�in�20091.
IT-BPO Scenario in the countryRussia’s�IT�market�volume�was�around�USD�16.3�billion�in�2007�and�grew�by�18�percent�inthe�same�year2.�Although�hardware�is�still�the�most�important�sub-sector,�IT�services�andsoftware�development�market�shares�have�increased�since�the�beginning�of�the�century.�In2007,�IT�services�accounted�for�28�percent�and�software�17�percent�of�market�share3.
International�providers�are�highly�successful�in�Russia.�However,�local�companies�are�nowcatching�up.�Auriga,�DataArt,�EPAM�Systems,�IBA,�Luxoft�and�Mera�were�recently�includedin�the�list�of�the�100�best�global�outsourcers�2008�conducted�by�the�InternationalAssociation�of�Outsourcing�Professionals�(IAOP).
Due�to�higher�competition�and�rising�salaries�for�qualified�IT�professionals�in�establisheddestinations�like�St.�Petersburg�and�Moscow,�companies�are�beginning�to�take�tier�II�citiesinto�consideration�when�searching�for�new�investment�locations.
Government incentives
The�Russian�government�offers�incentives�such�as�complete�depreciation�of�research�anddevelopment�costs�within�two�years�from�the�completion�of�the�project.�However,�ingeneral,�the�Russian�federal�government�has�tried�to�limit�the�use�of�incentives�by�theindividual�regions.�Regions�are�restricted�to�providing�limited�reductions�in�regional�taxes.However,�due�to�the�strong�competition�among�regions�for�investment,�many�regionalgovernments�tend�to�provide�support�with�infrastructure�and�site�investments.�
Russia
Size of the country 17,075,200 sq. kms.
Population 141.4 million (2007)
Capital Moscow
Currency Russian Rouble (RUB)
1 USD = RUB (average) 23.67 (2008)
Main macroeconomic indicators:1
• GDP in PPP: USD 2,089 billion (2007)
• GDP per capita in PPP: USD 14,680 (2007)
• CPI: 11.9 percent (2007)
• Unemployment rate: 6.2 percent (2007)
• FDI stock per capita: USD 2,800 (2007 est.)2
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BBB / Negative
Standard & Poor’s ForeignCurrency Risk Rating
BBB / Negative / A-3
Ease of Doing Business Rank(2009)
120
Rigidity of Employment Index(2009)
44
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008
2 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008
3 www.russoft.org, Russoft website, various pages, December 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
Rostov-on-Don
Moscow
St. Petersburg
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Rostov-on-Don
Quick facts
GeographicLocation
Located on the Don River, just 46 km from the Sea of Azov,approximately 2 hours by air from Moscow
Time Zone GMT +0300
ClimateTemperate continental climate, with average temperatureranging from -5.3 to 23.5 degrees Celsius. The averageannual rainfall is 45.8 cm.
Population1 1,052,000
Literacy rate2 99.4 percent*
Languages Russian
Major industriesLogistics, manufacturing, food and tobacco industry, timberindustry
1 www.donland.ru/english, Administration of Rostov-on-Don website, various pages,December 2008
2 www-03.ibm.com/press/us/en/pressrelease/24337.wss , IBM press release, 29 May 2008
3 www.upscalesoft.ru/eng, Upscale Soft Company website, December 2008;
4 PMR Publications - IT Market in Russia, 2008
Sources: 1 Russian Census (2007) 2 Investment Promotion Agency of Rostov Region
* National rate
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Rostov-on-Don is a known center for technical education in Russia,and has a qualified pool of entry level workforce
• Companies in Rostov-on-Don could also tap into talent available inthe neighboring cities of Bataysk and Aksay
• Rostov-on-Don has been attracting a large number of internationalinvestors. The city holds third place in Russia in the size of itsforeign trade turnover1
• Several Russian IT-BPO companies are using the hub and spokemodel; and setting up centers in Rostov-on-Don, after beingheadquartered in Moscow
• The cost of living as well as salaries in Rostov-on-Don aresignificantly lower than in tier I cities in Russia such as Moscowand St. Petersburg.
City Introduction
•�Rostov-on-Don�is�the�economic�and�cultural�center�of�southern�Russia.
•�It�is�a�transport�base�of�the�South�and�provides�an�outlet�to�the�coasts�of�theBlack�sea,�the�sea�of�Azov,�and�the�Caspian�Sea.
Key IT-BPO companies (Services offered)
USK (IT services)UpScale Soft (Softwaredevelopment)
Gendalf (IT services)Optima (Softwaredevelopment)
Yug Integrator (BPOservices)
SoftGrad (Softwaredevelopment)
Sources: Company websites
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Rostov-on-Don’s�market�has�constantly�grown�and�enjoys�stable�demand�for�IT�services
•�Most�of�the�companies�are�local�and�offer�system�integration�services
•�Although�local�companies�have�limited�financial�resources,�they�are�increasinglyexpanding�in�terms�of�territory�and�services�provided
•�In�2007,�IBM�opened�a�client�center�in�Rostov-on-Don2
•�UpScale�Soft,�a�Russian�software�firm,�opened�a�new�development�center�in�Rostov-on-Don�in�2007.�It�plans�to�increase�the�number�of�employees�from�35�to�100�in�20083.
Industry Profile – Size and Specifics
•�There�are�approximately�160�companies�operating�in�the�software�and�web-designindustry,�however,�most�of�them�have�their�IT�support�or�sales�departments�in�thecity4
•�Furthermore,�there�are�40�companies�offering�system�and�network�integration�services.Major�players�are�Micom,�BIS�and�Digital4
•�Currently,�the�volume�of�outsourced�work�is�limited
•�Rostov-on-Don’s�IT�sector�turnover�is�estimated�at�USD�10�million4
•�Key�services�in�the�area�include�IT�system�solutions,�call�center�and�increasinglyEnterprise�Resource�Planning�(ERP)�and�Customer�Relationship�Management�(CRM)systems�development.�
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•� More�than�55,000�students�study�at�Rostov-on-Don’s�Southern�Federal�University�with�over�10,000�students�enrolled�in�mathematicsand�information�science�faculties�in�Rostov�region1
•� According�to�some�sources,�demand�for�experienced�IT�professionals�is�growing�quickly.�However�Rostov-on-Don�along�with�other�largecities�in�its�vicinity�like�Bataysk�and�Aksay�can�provide�a�large�pool�of�human�resources
•� Although�wages�in�Rostov-on-Don�are�well�below�the�national�average5,�salaries�of�experienced�IT�specialists�have�started�to�increasedue�to�higher�demand.�Employees�with�English�language�capabilities�command�a�significant�premium
•� There�is�a�large�pool�of�skilled�but�relatively�inexperienced�employees�employed�by�the�local�IT�companies.�These�employees�wouldgenerally�be�eager�to�work�for�international�employers,�although�many�would�require�training.
Infrastructure
•�Office space: Although�there�are�approximately�350,000�sq.�mts.�of�office�space�available�in�Rostov-on-Don,�there�is�shortage�of�modernhigh�quality�office�buildings,�especially�in�the�city�center.�The�vacancy�rate�is�2-3�percent2
•�Power supply:�Although�power�outages�may�occur�from�time�to�time,�the�power�supply�is�generally�reliable
•�Telecom Infrastructure: There�are�several�mobile�phone�operators�and�telecommunication�providers�in�Rostov-on-Don.�Golden�Telecom,a�provider�of�integrated�telecommunication�services�has�partnered�with�Vimpelcom,�a�mobile�phone�firm,�to�construct�a�fiber-opticcommunication�line�on�the�Moscow�to�Voronezh�to�the�Rostov-on-Don�to�Krasnodar�segment
•�National and International connectivity: Rostov-on-Don�is�a�Russian�logistics�center�internationally�well�connected�by�rail,�water�androad6.�Rostov-on-Don�airport�provides�national�(more�than�90�cities�in�Russia)�and�international�flights�including�flights�to�Finland,Germany,�Turkey,�Dubai,�Austria�and�Bulgaria7
•�Upcoming projects: By�the�year�2010,�300,000�sq.�mts.�of�quality�office�space�is�planned,�including�more�than�15�business�centers�thatare�currently�planned�or�under�construction.�Significant�new�housing�has�been�built�and�more�than�400�buildings�in�the�city�center�wererefurbished.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�Local�governments�may�support�investments�by�providing�or�upgrading�regional�property.
Quality of life
•�Cost of living: Rostov-on-Don�is�less�expensive�than�Moscow�by�an�estimated�70�percent3.�The�latest�quality�of�life�index�by�theIndependent�Institute�for�Social�Policy�in�Moscow�ranks�Rostov�Region�as�number�28�out�of�88�analyzed�Russian�regions
•�Crime rate: Rostov-on-Don�does�not�feature�among�the�50�most�dangerous�Russian�cities4.�Rostov-on-Don's�authorities�have�started�a"safe�city�programme“,�which�aims�at�curbing�crime�by�tracking�migrants�and�foreigners,�and�by�making�the�police�more�accessible8
•�Pollution levels: The�government�has�already�taken�action�to�reduce�the�pollution�of�the�Don�River�which�is�expected�to�improve�theenvironmental�situation�in�the�region
•�Ease of commuting: Rostov-on-Don�has�good�road�network�facilitating�commuting�from�the�outskirts�of�the�city.�However,�there�is�hightraffic�congestion�in�the�city
•�Availability of Hotels: There�are�approximately�51�hotels�in�the�city9.�However,�the�demand�for�high�quality�accommodation�isincreasing�and�the�supply�of�deluxe�hotels�is�falling�short.�
Risk: City specific
•�Catastrophic risks: Rostov-on-Don�is�prone�to�floods,�especially�during�heavy�rains
•�Political risks: Although�there�are�isolated�allegations�of�favoritism�where�key�political�and�business�positions�in�the�city�and�the�regionwere�presumably�occupied�by�people�close�to�the�governor;�the�overall�political�situation�seems�to�be�stable.
1 www.donland.ru/english, Administration of Rostov-on-Don website, various pages, December2008
2 www.russiaprofile.org/resources/business/sectors/it, Russia Profile Information Service for ITsector, December 2008
3 KPMG Analysis based on News Research
4 NewsWeek Russia 2008
5 FAST update Rostov region, June 2007
6 eng.hcmg.ru, Hermitage Construction and Management Group website, December 2008
7 Kommersant, General Information on Rostov region, 2008
8 The BBC news, 14 August 2007
9 www.donland.ru/english, Administration of Rostov-on-Don website, various pages, December2008 114
Serbia
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Serbia�is�a�multiparty�democracy.�The�national�legislature�is�a�unicameral�Parliament�with250�seats.�The�President�is�elected�by�popular�suffrage.�Serbia�is�member�of�the�UnitedNations�and�the�Council�of�Europe�as�well�as�an�associate�member�of�the�European�Union.The�relation�between�EU�and�Serbia�is�difficult,�reflecting�issues�of�co-operation�with�theInternational�Criminal�Tribunal�for�former�Yugoslavia�(ICTY)�in�The�Hague,�differences�overKosovo�and�uncertainty�over�EU�enlargement.�
Business and Investment ClimateForeign Direct Investment (FDI): Most�investment�has�been�in�the�form�of�acquisitionsand�privatization,�however�the�number�of�greenfield�projects�is�increasing.�Predominantindustry�sectors�for�FDI�are�banking,�telecommunications�and�manufacturing.�FDI�of�USD3.4�billion�flowed�into�Serbia�in�2007,�and�of�over�USD�5.6�billion�in�2006.�However,investment�is�expected�to�decline�in�2009-10�because�of�recent�political�uncertainty�andglobal�financial�turmoil1.
GDP growth: Real�GDP�growth�(on�an�expenditure�basis)�in�Serbia�was�7.5�percent�in�20071.The�EIU�expects�this�to�fall�to�about�6.5�percent�in�2008.
Inflation: Given�falling�global�oil�prices�and�a�good�harvest�in�Serbia�inflationary�pressureshave�peaked�in�2008,�but�are�expected�to�decline�in�the�coming�years1.
IT-BPO Scenario in the countryRevenue�of�the�Serbian�IT�outsourcing�market�in�2007�was�USD�132�million2,�and�isexpected�to�grow�continuously�for�the�next�years,�as�the�banking�and�government�sectorsin�particular,�invest�in�IT.�
There�are�more�than�200�companies�providing�IT�outsourcing�services�in�Serbia,�employingmore�than�4,000�employees2.
The�associations�representing�the�IT-BPO�industry�in�the�country�are�the�Union�of�ICTSocieties�and�the�Informational�Society.
Government incentives3
Financial�incentives�are�provided�for�investments�in�the�services�sector�and�depend�on�thetotal�value�of�investment�and�the�number�of�new�jobs�created.�Cash�grants�amount�toaround�USD�2,500�to�USD�12,600�per�new�job�created.�Research�and�development�jobs�canbe�eligible�for�higher�grants�(USD�5,300�to�USD�12,600�for�each�new�job�created).�Eligiblecompanies�can�further�benefit�from�corporate�income�tax�exemptions�and�other�taxabatements.�Additionally,�social�insurance�contribution�exemptions�may�also�be�provided�ona�case-by-case�basis.
Serbia
Size of the country 77,474 sq. kms.
Population 10.2 million (2008)
Capital Belgrade
Currency Serbian Dinar (RSD)
1 USD = RSD (average) 82.30 (2008)
Main macroeconomic indicators:1
• GDP in PPP: USD 76.49 billion (2007 est.)
• GDP per capita in PPP: USD 10,350 (2007 est.)
• CPI: 6.8 percent (2007)
• Unemployment rate: 18.1 percent (2007)
• FDI stock per capita: USD 1,877 (2007 est.)4
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating CCC / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BB- / Negative / B
Ease of Doing Business Rank(2009)
94
Rigidity of Employment Index(2009)
39
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 20082 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007
3 www.siepa.sr.gov.yu, Investment Promotion Agency Serbia website, December 20084 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Belgrade
116
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Belgrade
Quick facts
GeographicLocation
Situated in north central Serbia, Belgrade can be reached inabout one to three hours by air from most European cities.
Time Zone GMT +0100
ClimateModerate continental climate with four pronouncedseasons. The average temperature is 11.7 degrees Celsius,while the average annual rainfall is 66.9 cm.
Population1 1,710,000
Literacy rate2 96.4 percent*
Languages Serbian, Albanian, Hungarian, English, German
Major industriesElectronics and telecom, shipbuilding, pharmaceuticals,chemicals, textiles.
1 Foundation for the Advancement of Economics and Center for Advanced Economic
Studies - Understanding Belgrade Services Sector, 2007
2 www.zis.bg.gov.yu/onama_eng.php, Statistical Office, Belgrade website, December 2008
3 www.soros.org/initiatives/thinktank/focus_areas/core/grantees/center_2007, Center for
Advanced Economic Studies, December 2008
4 Maps of the World website, December 2008
5 InfoWorld news article September 2005
6 News article from Strategic Analysis & OSINT management, 2008
Sources: 1 City of Belgrade website (2007) 2 CIA Factbook
* National level
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Belgrade has a qualified workforce with multi-lingual skills
• The ICT industry is a fast-growing, priority sector in Serbia,contributing to a significant 22.8 percent of the country’s servicesector1
• The city is also a strong base for the manufacturing industry,including engineering and IT hardware, and these skills can betapped into by companies
• The government offers aggressive incentives, including cash grantsper additional job created
• The business environment is steadily improving, and foreigninvestment is rising, which is likely to offer early companies to setup, a first mover advantage
• Belgrade’s similar time-zone is suited to near-shore service deliveryto Western Europe
• The city offers a significant cost advantage within European cities.
City Introduction
•�Belgrade�is�the�capital�and�largest�city�of�Serbia.�It�is�also�one�of�the�oldestcities�in�Europe4
•�It’s�the�country’s�economic�center,�housing�24�percent�of�the�population1.
Key IT-BPO companies (Services offered)
Microsoft (IT services)ComTrade Group(Technology center)
FinSoft (Softwaredevelopment)
Pamit (Softwaredevelopment)
Teletrader (Softwaredevelopment)
Saga Group (Systemintegration services)
Sources: Infoworld.com, BusinessWeek: company overview,
Teletrader.com, Goliath
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�The�ICT�sector�has�been�growing�in�Belgrade�over�the�past�eight�years�as�the�cityrecovers�from�its�international�isolation.�The�share�of�software�development�exportshas�constantly�increased�indicating�the�city’s�attractiveness�for�offshore�companies
•�In�2005,�Microsoft�established�its�technology�development�center�in�Belgrade�aftersetting�up�two�European�development�centers�in�Denmark�and�Ireland5
•�FinSoft�(UK)�and�TeleTrader�(Austria)�have�over�50�employees�engaged�in�softwaredevelopment�in�Belgrade6
•�Austrian�S&T�has�taken�over�IT�banking�solutions�provider�SITO�Inc.�Information�in20056.
Industry Profile – Size and Specifics
•�The�GDP�of�Belgrade’s�combined�ICT�and�engineering�sector�accounted�for�USD�688million2 in�2005.�This�reflects�a�22.8�percent�share�of�Belgrade’s�service�sector1
•�There�are�about�2,500�ICT�and�engineering�companies�operating�in�the�city�ofBelgrade3.
117
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•� Belgrade�has�well�developed�educational�infrastructure,�with�prominent�institutions�like�the�University�of�Belgrade,�the�University�ofApplied�Sciences�and�the�Singidunum�University.�Each�of�these�universities�offer�ICT�related�courses,�and�more�than�10�percent�of�thetotal�enrolments�are�in�ICT�related�courses1
•� More�than�14,000�students�graduated�in�2007�from�Belgrade’s�universities1.�A�large�proportion�of�the�workforce�in�Belgrade�havecompleted�university�education2
•� Out�of�Belgrade’s�114,000�unemployed�people�(19�percent)�approximately�10�percent�have�had�higher�education1.�This�represents�apotentially�employable�pool�of�resources
•��University�graduates�and�the�youth�speak�English�as�a�second�language
•� Although�average�salaries�are�higher�in�Belgrade�than�the�average�for�Serbia,�the�overall�real�salary�growth�for�the�coming�years�isexpected�to�be�moderate,�at�approximately�5�percent1.
Infrastructure
•�Office space: Around�66,000�sq.�mts.�of�office�space�was�added�in�Belgrade�in�the�first�half�of�2008,�with�75�percent�Class�A�space.Around�107,300�sq.�mts.�of�Class�A�and�B�office�space�is�expected�to�be�added�by�the�end�of�2008,�and�a�further�340,760�sq.�mts.�by2010.�The�overall�vacancy�rate�was�10�percent�in�mid�20083
•�Telecom Infrastructure: Belgrade�has�a�good�telecom�infrastructure.�Telecom�networks�in�Serbia�as�a�whole�have�been�undergoingmodernization�over�the�last�two�years.�GSM�wireless�service�is�rapidly�growing�and�available�through�multiple�providers�with�nationalcoverage
•�National and International connectivity: Nikola�Tesla�Airport�in�Belgrade�has�connecting�flights�to�key�European�destinations�and�citiesin�the�US.�The�completion�of�inner�city�infrastructure�developments�in�progress�(new�bridges,�a�bypass,�railways)�is�likely�to�makeBelgrade�well�positioned�among�other�Central�and�Eastern�Europe�(CEE)�countries.�Belgrade�is�well�connected�to�other�cities�withinSerbia�through�motorways�and�railways,�and�with�Novi�Sad�and�Budapest�through�motorways
•�Upcoming projects: Construction�of�the�IT�Park�in�Indija,�a�town�near�Belgrade,�is�set�to�begin�in�2008.�The�park�worth�USD�600�million,developed�by�Bangalore-based�Embassy�Group,�is�scheduled�for�completion�by�2013.�The�first�25,000�sq.�mts.�of�business�space�isplanned�to�be�completed�in�2009.�The�park�is�expected�to�grow�to�250,000�sq.�mts.�with�a�seating�capacity�for�25,000�employees�in�thenext�5�years6.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�Co-financed�employee�training�is�a�common�investment�incentive�provided�at�the�city-level.
Quality of life
•�Cost of living: Cost�of�living�is�low�compared�to�other�large�Eastern�European�cities.�However,�Belgrade’s�costs�of�living�have�increasedin�the�last�few�years.�According�to�the�EIU,�Belgrade�climbed�15�places�on�the�global�cost�of�living�index�between�2006�and�2007reflecting�the�overall�inflation
•�Crime rate: Crime�rates�are�regarded�as�high,�but�the�city�is�not�afflicted�with�as�much�street�crime�as�in�other�large�cities.�Movingthrough�the�city�by�foot,�bus�or�taxi�is�generally�regarded�to�be�safe4
•�Pollution levels: Although�public�transportation�is�available,�locals�typically�prefer�to�commute�by�car.�Congestion�is�common,�leading�toair�pollution.�Pollution�levels�within�the�city�are�high�compared�to�other�European�capital�cities
•�Ease of commuting: Vehicular�congestion�within�the�city�is�a�problem�due�to�limited�capacity�of�major�river�bridges�and�a�large�numberof�cars.�However,�ongoing�infrastructure�iimprovements�are�likely�to�facilitate�commuting�within�and�from�the�outskirts�of�the�city
•�Availability of Hotels: In�2003,�Belgrade�had�36�hotels�with�about�5854�beds,�of�which�over�50�percent�were�in�the�three�or�four-starcategory5.
Risk: City specific
•�Catastrophic risks: Serbia�has�experienced�some�minor�earthquakes,�and�tremors�have�been�felt�in�Belgrade�in�2007�as�well�2008.�Thecountry�has�also�witnessed�large-scale�flooding�of�the�Danube�in�recent�years7
•�Political risks: The�US�State�Department�currently�rates�Belgrade�high�for�political�violence�-�organized�crime�seems�to�be�a�majorsource�for�concern�as�it�relates�to�political�violence
•�History of disruptions: There�were�attacks�on�the�US�Embassy�and�American�businesses�in�February�2008�in�response�to�Kosovo’sdeclaration�of�independence8.�Spontaneous�demonstrations�take�place�in�Serbia�from�time�to�time�in�response�to�world�events�or�localdevelopments,�e.g.�recent�demonstrations�protesting�the�arrest�of�Radovan�Karadzic,�wanted�by�the�International�Criminal�Tribunal�forthe�Former�Yugoslavia.
1 www.ci.belgrade.mt.us, City of Belgrade website, various pages, December 2008
2 www.iiwb.org, Invest in the Western Balkans website, December 2008
3 Colliers International, 2H 2008
4 www.siepa.sr.gov.yu, Investment Promotion Agency Serbia website, December 2008
5 Belgrade Hotel Investment Survey, 2004
6 www.lbzetaproperties.com/pdf/serbia/Serbia_general_info.pdf, lbzetaproperties website,December 2008
7 news.bbc.co.uk/2/hi/europe/4917820.stm, The BBC/ B92 News articles
8 NYTimes article, Kosovo Declares Its Independence From Serbia, 18 February 2008 118
Tunisia
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure2
Tunisia�is�a�Republic�with�a�limited�democracy.�The�parliament�currently�has�163�membersand�it�serves�for�five�years.�In�October�2004,�Tunisia's�President�was�elected�by�universalsuffrage�for�a�5-year�term�for�the�fourth�consecutive�time.�The�next�presidential�andparliamentary�elections�are�to�be�held�in�2009.��
Business and Investment ClimateForeign Direct Investment (FDI): Tunisia�has�been�successfully�attracting�FDI�in�recentyears.�In�2007,�USD�1.6�million�foreign�investments�flowed�into�the�country¹.�During�the�firsthalf�of�2008,�FDI�grew�by�43�percent�compared�to�the�same�period�of�time�in�20073.
GDP growth: GDP�growth�is�expected�to�slow�to�4.7�percent�in�2008�and�4�percent�in20091.�
Inflation: Inflation�is�expected�to�be�4�percent�in�2008�and�is�likely�to�decline�to�3.8�percentin�20091.
IT-BPO Scenario in the countryThe�Tunisian�offshore�ICT�industry�is�concentrated�in�and�around�Tunis.�The�ICT�sector�grewon�an�average�by�42.5�percent�annually�between�2002�and�2006�which�is�mainly�due�to�callcenter�investments�by�French,�Spanish�and�Italian�companies�like�Alcatel�Lucent�andSagem4.
There�are�1548�computer�and�engineering�companies�in�Tunisia5.�The�number�of�sharedservices�centers�have�increased�from�14�in�2002�to�110�in�20076.�Major�foreign�investorsare�Microsoft,�Siemens,�Gensym�and�STMicroelectronics.
Tunisia’s�national�industry�strategy�focuses�on�ICT�development�as�a�priority�sector.�Thesector’s�contribution�to�GDP�is�expected�to�reach�13.5�percent�during�2007�-�20115.
ITinTunisia�is�the�national�platform�for�the�ICT�industry�in�Tunisia7.
Government incentives5
The�government�is�eager�to�attract�foreign�investment�and�create�new�jobs.�Corporateincome�tax�exemptions�and�other�tax�abatements�are�offered�to�attract�internationalinvestors.�Furthermore,�the�government�can�assume�portions�of�training�costs�(up�to�25percent),�employer’s�social�security�contributions�and�/�or�salary�for�new�hires.
•�The�following�advantages�are�granted�to�investors�in�the�IT�segment:�
•�Fifty�percent�tax�break�for�IT�investors
•�Investment�allowance�up�to�6�percent�of�the�investment�amount�for�young�projectdevelopers
•�Eligibility�for�upgrading:�subsidy�of�10�to�20�percent�for�material�and�of�70�percent�fornon-material�investment�(Software�services)
•�Special�incentives�for�Venture�Capital�Investment�Companies�operating�in�the�ITsegment.
Companies�focused�on�the�export�market�may�benefit�from�100�percent�tax�exemptions�onexport-derived�profits�for�10�years�and�a�corporate�tax�rate�of�10�percent,�thereafter.�Taxexemption�on�reinvested�profits�and�income�and�duty�exemption�on�capital�goods�andservices�needed�for�operations�are�additional�benefits�provided.
Tunisia
Size of the country 163,610 sq. kms.
Population 10.3 million (2007)
Capital Tunis
Currency Tunisian Dinar (TND)
1 USD = TND (average) 1.17 (2008)
Main macroeconomic indicators:1
• GDP in PPP: USD 75.99 billion (2007)
• GDP per capita in PPP: USD 7,360 (2007)
• CPI: 5.3 percent (2007)
• Unemployment rate: 14.1 percent (2007)
• FDI stock per capita: USD 2,539 (2007)
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating BB / Stable
Standard & Poor’s ForeignCurrency Risk Rating
BBB / Stable / A-3
Ease of Doing Business Rank(2009)
73
Rigidity of Employment Index(2009)
49
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 20082 www.edc.ca/english/docs/gtunisia_e.pdf, EDC Economic Monitor Tunisia, December 20083 American Chamber of Commerce, Business Monthly September 20084 www.tunisiaonline.com/government/index.html, Government of Tunisia website, December 2008
5 www.investintunisia.tn/site/fr/article.php?id_article=192, Invest in Tunisia website,December 20086 ITinTunisia: Le nearshoring en Tunisie, 20087 it.utica.org.tn/site/fr/article.php?id_article=9, Tunisia IT – ICT Business Portal, December2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Tunis
120
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Tunis
Quick facts
GeographicLocation
Situated on the Gulf of Tunis in north of Tunisia. Tunis is atwo and a half hour flight away from Paris
Time Zone GMT +0100
Climate
Mediterranean climate. The summer temperature variesbetween 21 and 33 degrees, and that in winter variesbetween 6 and 14 degrees Celsius. Average annual rainfallis 57.2 cm.
Population1 2.3 million
Literacy rate2 74.3 percent*
Languages3 Arabic, French, English, Italian*
Major industries4 Textile, energy, manufacturing
1 www.investintunisia.tn, Invest in Tunisia website, December 2008
2 www.gfh.com/en/our-business/tunis-financial-harbour.html, Gulf Finance House website,December 2008
3 www.tunisia.com/tunisia/News/Travel/Tunisia-taps-into-medical-tourism, Tunisia.com newsarticle; 2008
4 Alcatel-Lucent white paper: Bridging the digital divide, 31 August 2004
5 www.oxfordbusinessgroup.com/publication.asp?country=20, Oxford Business Group ReportTunisia, December 2008
6 www.animaweb.org/en/pays_tunisie_en.php, ANIMA Investment Network, December 2008
7 www.tunisianindustry.nat.tn, German-Tunisian Chamber of Commerce and Industry website,December 2008
Sources: 1 Tunisia online (2007); for Tunis metropolitan area2 CIA Factbook 3 Country presentation Anima Investment Network4 Tunisian Industry Portal
* National level
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Tunis has a qualified workforce with a technical background, andforeign language capabilities
•Tunis is the country’s political as well as commercial capital and isable to attract skilled personnel from other parts of the country too
•The city benefits from the cultural and geographic proximity toEurope, and is an attractive near-shore destination due to thesimilar time-zone
•The government plans to set up the Tunis Financial Harbor, anoffshore financial services business cluster, with an investment ofUSD 3 billion2, which is likely to bring in significant investmentsinto the city
•Tunis is a major North African tourist destination. Medical tourismis on the rise in the city, and attracts European investments3
•Tunis provides a significant cost advantage over Europeancountries1.
City Introduction
•�Tunis�is�the�capital�of�Tunisia�
•�It�is�the�country’s�most�important�commercial�industrial�center1.
Key IT-BPO companies (Services offered)
Microsoft (Innovationcenter)
Alcatel (Software center)
Siemens (IT services andelectronic industry)
Teleperformance (ICTservices)
Global Call Center(CRM, Call center)
AISA (IT and BPO servicesfor the airline industry)
Sources: Company websites, Invest in Tunisia, Tunisair PressRelease
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�Tunis�emerged�as�an�IT-BPO�location�in�the�early�2000s.�In�2003,�Alcatel-Lucent�startedits�software�development�and�engineering�center4
•�The�number�of�higher�value-added�IT�services�investment�projects�have�been�on�therise�since�2006�
•�One�of�the�main�investment�projects�in�2007�included�Microsoft’s�innovation�center�inthe�El�Gazala�Pole�of�Communication�Technologies�Park5
•�Microsoft’s�center�supports�the�development�of�Tunisia’s�software�industry�bydeveloping�intellectual�capital�and�strengthening�local�computer�engineering�servicescompanies5
•�Other�major�investors�include�Siemens,�Gensym,�Huawei�and�STMicroelectronics.
Industry Profile – Size and Specifics
•�The�majority�of�Tunisian�and�foreign�call�centers�as�well�as�the�offshore�ICT�industry�areconcentrated�in�and�around�Tunis
•�The�ICT�sector�is�a�fragmented�market�with�most�of�the�companies�employing�10�orless�personnel6 ,usually�providing�services�for�domestic�and�foreign�customers�withinthe�call�center�sector
•�The�services�offered�out�of�Tunis�include�IT�Infrastructure,�IT�training�ADM,�ERP,�financeand�accounting,�call�center,�CRM
•�Many�multinationals�operate�in�the�El�Gazala�Pole�of�Communication�Technologies�Park.The�park�hosts�approximately�50�companies�employing�1,300�people7.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•� There�are�3�universities�located�in�Tunis�that�educate�more�than�95,000�students�in�technical�subjects,�commerce,�technology�andengineering.�The�total�annual�number�of�IT�graduates�in�the�country�is�expected�to�grow�from�the�present�8,000�to�12,000�in�20111
•� The�government�has�allocated�a�bulk�of�the�national�budget�to�education2,�and�these�investments�have�aided�in�generating�a�qualified,motivated�and�flexible�workforce.�Entry-level�employees�often�lack�on-the-job�experience�and�require�additional�training
•� Tunis’�high�unemployment�rate�(14�percent3)�and�a�large�number�of�young�unemployed�graduates�in�and�around�Tunis�represent�anattractive�workforce�pool�for�ICT�companies
•� Increased�demand�and�competition�for�experienced�ICT-engineers�has�led�to�growing�wages�for�engineers�who�have�worked�in�amultinational�environment.
Infrastructure
•�Office space (IT Parks): Tunis’�office�rents�are�competitive�compared�to�major�cities�in�the�Middle�East�and�North�Africa.�However,availability�of�larger�office�space�is�still�limited.�El�Gazala�Pole�of�Communication�Technologies�park�provides�modern�infrastructure�forhigh-tech�and�ICT�companies4.�The�park�currently�hosts�a�number�of�call�centers�and�internet�research�centers
•�Power supply: The�power�supply�in�Tunis�is�constant�and�blackouts�are�infrequent.�The�city�enjoys�an�electrification�rate�of�99.9�percent5
•�Telecom Infrastructure: Tunis’�telecommunication�network�is�characterized�by�comparatively�high�costs.�However,�Tunisie�Telecom�–Tunis’�telecommunications�agency�grants�preferential�rates�for�call�centers�operating�in�the�city6
•�National and International connectivity: Tunis-Carthage�International�Airport,�located�seven�kms�from�northeast�Tunis,�has�regularflights�to�various�locations�in�Europe�(such�as�Rome,�Paris,�Barcelona,�London)�as�well�as�major�North�African�and�Middle�Eastern�cities(such�as�Cairo,�Casablanca,�Jeddah)7
•�Upcoming projects: The�Tunis�Financial�Harbour,�planned�over�an�area�of�445�hectares,�is�to�have�a�business�cluster,�commercial�/residential�developments,�and�a�business�school8.�Sama�Dubai�plans�to�spend�approximately�USD�13�billion�on�luxury�real�estatedevelopment�in�Tunis,�building�apartments,�offices,�hotels�over�837�hectares�of�land9.�
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�The�local�government�is�keen�to�attract�foreign�investment�and�create�employment,�large�investors�may�receive�additionally�negotiated�/discretionary�benefits�like�training�costs.
Quality of life
•�Cost of living: Cost�of�living�is�relatively�low�compared�to�other�cities�in�North�Africa.�Tunis�ranked�133�in�Mercer’s�2008�Annual�Cost�ofLiving�Index.�The�city�is�more�affordable�than�Casablanca,�Algiers�and�Cairo
•�Crime rate: The�crime�rate�in�the�city,�especially�burglary�and�street�crime,�is�on�the�rise10
•�Pollution levels: The�growing�number�of�inhabitants�and�vehicles�as�well�as�increasingly�active�industry�sectors�have�led�to�higherpollution�levels�in�the�city.�Recently�introduced�environmental�measures�are�expected�to�improve�air�and�water�quality�in�the�mediumterm
•�Ease of commuting: Tunis�has�an�extensive�network�of�public�transportation�including�buses,�an�above-ground�light�rail�system�(Metro)and�a�regional�train�line�(TGM)�that�links�the�city�center�to�its�closest�northern�suburbs.�A�multi-lane�road�network�surrounds�the�city,however,�traffic�density�is�high�and�congestion�is�common�during�rush�hour�
•�Availability of Hotels: There�are�over�15�luxury�hotels�in�Tunis,�including�international�chains.
Risk: City specific
•�Catastrophic risks: Tunis�is�situated�in�a�low-risk�seismic�area�with�the�probability�of�minor�seismic�activity.�The�city�is�prone�to�floods,and�the�local�government�has�taken�up�flood�management�projects�to�mitigate�the�risks�.In�2007,�several�people�were�killed�due�tofloods�caused�by�torrential�rain11
•�History of Disruptions: There�is�a�general�threat�from�terrorism�in�Tunisia12.�In�2006,�12�Islamic�terrorists�were�killed�and�fifteenarrested�in�Tunisia�for�planning�terrorist�operations7.
1 www.education.tn/en/ministere/etab_s_tutel.htm, December 2008
2 www.tacc.org.tn, Tunisian American Chamber of Commence website, December 2008
3 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008
4 www.elgazalacom.nat.tn, El Gazala Pole of Communication Technologies website, December 2008
5 www.unido.org, National Investment Promotion Agency of Tunisia website, December 2008
6 www.investintunisia.tn, Invest in Tunisia website, December 2008;
7 Foreign Affairs and International Trade Canada: Doing Business in Tunisia; 2007
8 Ame Info news article;
9 UAE Interact
10 OSAC, Tunis, Tunisia Crime and Safety Report by OSAC, 2006
11 Reuters news article;Tunisia floods, 14 October 2007
12 www.fco.gov.uk/en/about-the-fco/country-profiles/middle-east-north-africa/tunisia,December 2008
13 Foreign Affairs and International Trade Canada: Doing Business in Tunisia, 2008122
Ukraine
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Political Structure1
Ukraine�is�a�democracy�with�a�parliamentary-presidential�system�of�government�consistingof�separate�executive,�judicial,�and�legislative�branches.�A�new�constitution�was�approvedby�the�Verkhovna�Rada�(Supreme�Council,�or�Parliament)�in�June�1996.�Since�2006,�amajority�of�deputies�in�the�450-member�unicameral�parliament�form�a�coalition,�which�thennames�the�prime�minister,�who�in�turn�nominates�other�ministers.�The�Parliament�initiateslegislation,�ratifies�international�agreements�and�approves�the�budget.�Its�members�areelected�for�five-year�terms.�The�country�is�administratively�divided�into�24�provinces,�1autonomous�republic�and�2�cities�(Kyiv�and�Sevastopol)�with�special�status.
Business and Investment ClimateForeign Direct Investment (FDI): Ukraine�has�seen�a�sharp�increase�of�FDI�inflows�in�thelast�3�years,�reaching�USD�10�billion�in�20081.�FDI�flows�are�mainly�into�the�financial�andthe�manufacturing�sector.
GDP growth: The�real�GDP�growth�in�Ukraine�was�7.7�percent�in�2007.�The�EIU�expects�thisto�fall�to�about�6.5�percent�in�2008�and�less�than�5�percent�in�2009�due�to�the�globalslowdown.
Inflation: Ukraine�has�suffered�from�the�worldwide�financial�crises�resulting�in�severeinflation�and�recessionary�concerns.�Inflation�in�the�Jan-Oct�2008�period�was�18�percent,over�12.8�percent�in�20072.
IT-BPO Scenario in the countryICT,�high�tech�and�consumer�electronics�are�priority�sectors�of�Ukraine’s�national�FDIstrategy.�The�ICT�market�has�grown�constantly�during�the�last�six�years.
The�IT�outsourcing�market�accounts�for�USD�544�million3.�There�are�800�IT�outsourcingcompanies�employing�14,000�IT�specialists3.�Since�2000,�the�Ukraine�has�become�anattractive�outsourcing�destination�in�Eastern�Europe�providing�software�developmentservices�to�clients�in�the�US�and�Western�Europe.
Ukraine�is�also�an�attractive�location�for�offshore�/�near-shore�companies,�home�to�manysubsidiaries�of�international�companies�like�IBM�Ukraine,�Comarch,�Microsoft,�SAP,�Aricent,ISM�eCompany,�and�Ciklum.�Ukraine�has�several�home-grown�ICT�companies.
Whereas�initial�outsourcing�investment�focused�on�Kyiv�(40�percent�of�FDI�projects4)companies�are�now�focusing�on�second�tier�cities�such�as�Lviv�and�Kharkiv�as�potentialinvestment�destinations.�
The�Ukrainian�Hi-Tech�Initiative�and�IT�Ukraine�are�the�associations�representing�the�IT-BPOindustry�in�the�country3.
Government incentivesAlthough�the�central�government�does�not�provide�any�incentives,�the�local�governments�atthe�province�or�city�level�can�offer�support�and�facilitate�the�setting�up�process�forbusinesses.�
Ukraine
Size of the country 603,700 sq. kms.
Population 46.5 million (2007)
Capital Kyiv, or Kiev
Currency Hryvnia (UAH)
1 USD = UAH (average) 4.98 (2008)
Main macroeconomic indicators:1
• GDP in PPP: USD 322.6 billion (2007 est.)
• GDP per capita in PPP: USD 6,980 (2007 est.)
• CPI: 16.6 percent (2007)
• Unemployment rate: 2.3 percent (2007)
• FDI stock per capita: USD 791 (2007 est.)5
2008 (Rating/outlook)
EIU’s Sovereign Risk Rating B / Negative
Standard & Poor’s ForeignCurrency Risk Rating
B/ Negative/ B
Ease of Doing Business Rank(2009)
145
Rigidity of Employment Index(2009)
45
Country Snapshot
1 www.eiu.com, Economist Intelligence Unit website, various pages, December 2008
2 www.ukrstat.gov.ua, State Statistics Committee, Ukraine, December 2008
3 Ukranian Hi-Tech Initiative, CEE IT Outsourcing Review, 2007
4 www.oecdobserver.org, Report on Ukraine, 2008
5 Vienna Institute for International Economic Studies, Foreign Direct Investment in Central, Eastand Southeast Europe, June 2008
Sources: www.eiu.com, www.cia.gov, www.GoCurrency.com
Sources: www.eiu.com, World Bank, Standard & Poor’s
Emerging Destination
Established Destination
LvivKyiv
Kharkiv
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Lviv
Quick facts
GeographicLocation
Located in western Ukraine, it can be reached from capitalKyiv by air in about one hour
Time Zone GMT +0200
ClimateModerate continental climate, with average summertemperature of 18 degrees and average winter temperatureof -4 degrees Celsius. The average annual rainfall is 66 cm.
Population1 735,000
Literacy rate2 99.4 percent
Languages Ukrainian, Russian, Polish
Major industriesElectronics, mechanical engineering, food processing,chemicals, tourism
1 International Herald Tribune, Poland and Ukraine to host Euro 2012, 18 April 2007
2 www.lviv-life.com, December 2008
3 www.investukraine.org, December 2008
4 www.goaleurope.com/main.php?p=85&more=1&c=1, Consolidation in Europe, February 2008
5 Munk, Andersen and Feilberg, Software Development in Ukraine, November 2008
Sources: 1 Statistical office, Lviv2 KPMG Analysis
Key drivers for the city to emerge as a favorable IT-BPOdestination
• Lviv has an educated workforce with a large number of technicalgraduates and engineers
• The city has a strong position in IT services in Ukraine. It hasseveral domestic IT-BPO companies, which can be acquired orpartnered with to enter the country
• Lviv’s cultural and geographical proximity with Western Europe andtime-zone advantage makes it suited for offshore delivery toWestern Europe
• Lviv is to co-host the European Football Championship in 20121,which is likely to bring about improvements in infrastructure andquality of life in the city.
City Introduction
•�Lviv�(or�Lvov)�is�Ukraine’s�seventh�largest�city1
•�It�is�one�of�the�main�cultural�centers�of�Ukraine�and�a�UNESCO�World�Heritagesite2.�
Key IT-BPO companies (Services offered)
SoftServe (Applicationdevelopment andmaintenance services)
Eleks Software (ITservices)
Lohika (Applicationdevelopment andmaintenance services)
ArtfulBits (BPO services)
InterObject (Research anddevelopment center)
Intellias (Softwaredevelopment)
Sources: Company websites, Businesswire news article, PressRelease - Lohika Systems, Software development in Ukraine:
Mafcon
Current IT-BPO scenario in the city Development of the current IT-BPO industry
•�The�Ukrainian�IT�and�offshore�outsourcing�industry�has�started�to�see�someconsolidation�in�the�last�few�years
•�Induslogic�(now�GlobalLogic),�a�US-based�provider�of�outsourced�software�productdevelopment�services�acquired�Ukrainian�outsourcer�Bonus�Technology�in�20063.Another�company�EDB,�a�Scandinavian�IT�service�provider,�bought�a�majority�stake�inUkrainian�Infopulse�and�Miratech�in�Kyiv4
•�The�BPO�sector�in�Lviv�is�still�at�an�early�stage�of�development,�but�has�the�potential�toemerge�as�an�attractive�lower�cost�alternative�to�established�markets�in�Hungary�or�theCzech�Republic.�
Industry Profile – Size and Specifics
•�Software�companies�in�Lviv�employ�around�2000�professionals5
•�A�number�of�Ukrainian�IT�companies�like�Soft�Serve�(900�employees)�and�EleksSoftware�(250�developers)�have�large�centers�in�Lviv5.
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Human Resources
•� Lviv�has�a�large�resource�pool�of�qualified�IT�specialists,�and�renowned�universities�like�the�Lviv�Polytechnic�University�and�the�LvivNational�University.�The�Lviv�Polytechnic�University�produces�about�15,000�graduates�annually,�with�over�1,000�from�IT-related�courses1
•� Average�salaries�for�IT�professionals�in�Lviv�are�lower�than�salaries�in�Kyviv2
•� IT�companies�in�Lviv�such�as�Softserve,�Lohika�and�Eleks�have�set�up�training�centers�to�develop�the�talent�in�the�city2.�Competition�forIT�specialists�is�moderate�in�Lviv
•� Ukraine�currently�does�not�face�a�threat�of�emigration�of�qualified�professionals�to�higher�wage�European�Union�(EU)�countries,�as�it�isnot�an�EU�member�and�its�workforce�is�subjected�to�strict�EU�visa�regulations.
Infrastructure
•�Office space (IT Parks): The�office�market�in�Lviv�is�still�developing.�The�estimated�addition�to�office�space�is�around�120,�000�sq.�mts.by�20123.�Vacancy�rates�are�currently�low
•�Telecom infrastructure: Although�penetration�of�ICT�has�improved�in�recent�years,�there�are�some�problems�in�the�reliability�and�qualityof�fixed�telecom�infrastructure.�Telecom�infrastructure�improvements�are�mainly�in�major�regional�centers,�however�there�is�a�lag�interms�of�penetration�to�local�networks�and�exchanges.�Most�investments�into�the�growing�mobile�sector�are�private
•�National and International connectivity: Lviv�airport�serves�domestic�and�international�flights,�most�frequent�services�are�daily�flightsto�and�from�Warsaw�and�Kyiv,�connections�with�Toronto,�Manchester,�Frankfurt,�and�airports�in�Russia,�Caucasus�and�Middle�Asia
•�Upcoming projects: A�few�technology�parks�have�been�proposed�around�Lviv.�The�Lviv�Airline�plans�to�construct�a�technology�park�onits�land4.
State/ city specific incentives for IT-BPO over and above country level incentives, if any
•�Two�special�economic�zones�are�functioning�in�the�region:�SEZ�“Yavoriv”�and�“Kurortopolis�“Truskavets”.�Investment�projects�in�thesezones�benefit�from�tax�privileges5.�Over�and�above�this,�the�local�government�does�not�offer�formal�investment�incentives.�Companiesmay�seek�the�administration’s�support�with�property�and�other�aspects�related�to�establishing�operations�in�Lviv.
Quality of life
•�Cost of living: Cost�of�living,�aside�from�housing,�is�low�in�comparison�to�other�large�Eastern�European�cities.�Housing�costs�arecomparatively�high�in�Ukraine.�The�price�of�secondary�housing�soared�by�over�20�percent�in�2007,�whereas�the�primary�market�is�stilldeveloping3
•�Crime rate: The�crime�rate�is�moderate�compared�with�other�Eastern�European�countries
•�Pollution levels: Since�exhaust�filters�are�not�yet�required�for�cars,�air�quality�in�Lviv�is�not�up�to�western�European�standards
•�Ease of commuting: Ukraine’s�infrastructure�is�still�developing,�but�is�comparable�to�that�in�Poland,�Bulgaria�and�Romania.�A�loan�to�thetune�of�USD�140�million�has�been�granted�by�the�European�Bank�for�Reconstruction�and�Development�to�be�used�to�develop�the�city’stransport�(road,�railway�connections,�airport�terminal)�and�communication�infrastructure,�as�a�result�of�Lviv�hosting�the�EuropeanFootball�Championships�in�20126
•�Availability of hotels: Lviv�is�a�well�developed�tourist�center�in�Ukraine,�with�good�tourism�infrastructure.�According�to�the�regionalstate�administration,�there�are�plans�to�build�20�new�hotels�by�2012�to�host�visitors�to�Lviv�during�the�European�FootballChampionships7.�
Risk: City specific
•�Catastrophic risks: Lviv�province�was�hit�by�a�flood�in�July�2008�causing�damage�to�some�bridges�in�the�area7
•�Political risks: The�political�situation�in�Ukraine�has�been�unstable�over�the�last�two�years�due�to�animosity�between�its�two�politicalfactions.�This�risk�is�likely�to�continue�and�may�impact�economic�spending�and�investment�decisions�of�the�government8
•�History of disruptions: Lviv�was�hit�by�a�hurricane�in�June�2008,�which�rooted�out�3,000�trees�and�damaged�about�100�cars�andseveral�buildings9.
1 Munk, Andersen and Feilberg, Software Development in Ukraine, November 2008
2 Mafcon, Software development in Ukraine, November 2008
3 CB Richard Ellis, June 2008
4 www.investinpoland.pl, December 2008
5 www.rada.com.ua/eng/RegionsPotential/Lviv, December 2008
6 KyivPost news article, EBRD approves EUR 100m loan for Lviv transport project, 23 December2008
7 Zik News, Flood kills 22 Ukrainians, 28 July 2008
8 Ukraine Today website and Economist Intelligence Unit, December 2008
9 RedTram news, Hurricane in Lviv, 24 June 2008126
©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
Concluding Kumar Parakala
Global�Head�of�Sourcing�Advisory
As our study indicates, a wide range of choices are available for companies in many partsof the world. Although the basic advantages offered by these cities may be the same –for instance, lower costs, qualified talent and aggressive incentives. The nuances amongthese offerings and their combination makes each city’s offerings unique, even in case ofcities within a country.
It is interesting to note that even though a large talent pool may be available in many ofthe cities, the skills and expertise vary. Some cities may have workforce qualified fortechnology-driven tasks, while others may have workforce suited for high-end knowledgeprocesses. Similarly, talent suited for call centers may vary across cities due to languageskills – the workforce in Cairo speak Arabic and English, while those in Santiago speakSpanish and English. Changsha is becoming a center for animation and is well positionedto support the animation industry. Port Louis, even in a small country like Mauritius, maynot have a large skilled labor pool, however, is considered as a good disaster recoverylocation.
Accordingly, each of the 31 cities in our analysis has different offerings, and willtherefore appeal to a different set of companies depending upon their priorities andstrategies. At the same time, the range of options may also bring in potentially higherrisks for companies that need to be balanced with the potential benefits.
We believe that companies need to ask some key questions before weighing their optionsand arriving at their shortlist of locations, including:
• How will the location fit in with the overall business strategy?Does the company require its offshore operations to be in a specific geography, basedon its market entry strategy, existing facilities or future requirements?
• What are the key criteria for location selection?What is the relative importance of priorities for the company? For instance, is thecompany willing to settle for a higher cost in return for a better talent pool?
• How best can the company evaluate locations based on the defined priorities?How can a shortlist be drawn up based on costs, operating factors and other relevantcriteria?
• How can project risk be minimized?How best can a company avoid risks such as selecting a sub-optimal site, missingopportunities for incentives, or project delays?
The task does not end once the location is selected. The company should then put inplace a comprehensive plan to optimally leverage the opportunities and advantagesoffered by the location and implement any necessary risk mitigation strategies. Havingsaid this, we hope that our study will be valuable in your location selection exercise.
We wish you all the success in this exciting journey!
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©�2009�KPMG�International�is�a�Swiss�cooperative.�Member�firms�of�the�KPMG�network�of�independent�firms�are�affiliated�with�KPMG�International.�KPMG�International�provides�noclient�services.�No�member�firm�has�any�authority�to�obligate�or�bind�KPMG�International�or�any�other�member�firm�vis-à-vis�third�parties,�nor�does�KPMG�International�have�any�suchauthority�to�obligate�or�bind�any�member�firm.�All�rights�reserved.�KPMG�and�the�KPMG�logo�are�registered�trademarks�of�KPMG�International.
AbbreviationsTerm Description
ADM Application Development and Maintenance
BPO Business Process Outsourcing
CEE Central and Eastern Europe
CRM Customer Relationship Management
EOU Export Oriented Unit
ERP Enterprise Resource Planning
EU European Union
FDI Foreign Direct Investment
GMT Greenwich Mean Time
ICT Information and Communications Technology
Term Description
IT Information Technology
ITO Information Technology Outsourcing
KPO Knowledge Process Outsourcing
MNC Multinational Corporation
MW Megawatt
NATO North Atlantic Treaty Organization
OECD Organization for Economic Co-operation and Development
US United States of America
USD US Dollar
VAT Value Added Tax
Explanation of Key TermsTerm Description
GDP in PPPGross Domestic Product in Purchasing Power Parity. GDP is defined as the total market value of all final goods andservices produced within the country in a given period of time (usually a calendar year). Purchasing power parity(PPP), mainly used for comparison is an adjusted exchange rate based on the relative cost of living and inflationrates between countries
GDP per capita in PPP GDP in PPP divided by the country's current population
CPI Consumer Price Index. The CPI is a measure of the average price of consumer goods and services purchased byhouseholds. The percent change in the CPI is a measure of inflation
FDI stock per capita Cumulative stock of inward Foreign Direct Investment (FDI), divided by the current population of the country
Real GDP / Real growth rate ofGDP
Real GDP is a macroeconomic measure of the size of an economy adjusted for price changes and inflation. The realgrowth rate is the growth rate adjusted for price changes and inflation
EIU's Sovereign Risk RatingThe Economic Intelligence Unit's Sovereign Risk Rating assesses the probability of whether a a country may defaulton its debts. It indicates the risk of a build-up in arrears of principal and / or interest on foreign- and / or local-currency debt that is the direct obligation of the sovereign or guaranteed by the sovereign, going from C (lowest) toAAA (highest). For more information, please visit www.eiu.com
Standard & Poor’s ForeignCurrency Risk Rating
Standard and Poor's rating measures the obligor's capacity to repay foreign currency obligations, with “AAA” beingthe highest, and “C” being the lowest. For more information, please visit www.standardandpoors.com
Ease of Doing Business RankThis World Bank study published annually ranks economies on their ease of doing business, from 1 to 181, rank 1being the most conducive business environment. The rankings are from the Doing Business 2009 report, covering theperiod April 2007 to June 2008. For more information, please visit www.doingbusiness.org
Rigidity of Employment IndexPart of World Bank's Doing Business Report, the index denotes the difficulties that employers face in hiring andfiring workers, on a scale of 0 to 100, with higher values representing more rigid regulations. For more information,please visit www.doingbusiness.org
Near-shoring Offshoring to a nearby country, that is easily accessible and is located in the same or a neighboring time zone
Offshoring Outsourcing processes / activities to a shared service / external service provider in a country other than theoriginating country
Shared Services Often, used interchangeably with the term “captive”. The consolidation of common functions, systems, processes andpersonnel across several business units into an internal service bureau, managed as an independent organization
Software Park, or Technologypark, or IT Park
A building or complex constructed especially for technology companies. Typically, these parks would have high-speedbroadband connectivity, reliable power supply and ready office space. In some countries, these parks are also specialeconomic zones that offer financial benefits or incentives for companies who set up offices
Tier I, II and III cities Typically, country capitals and metro cities as being the Tier-I category cities, smaller cities such as state capitalsand bustling towns are defined as Tier-II, while upcoming cities and/or semi-urban centres are defined as Tier-III.
Class A and B office spaceClass A space is typically refered for buildings that have excellent location and access, attract high quality tenants, andare managed professionally. Building materials are high quality and rents are competitive with other new buildings. Class B buildings have good locations, management, and construction, and tenant standards are high. Buildings havevery little functional obsolescence and deterioration.
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This�research�report�would�not�have�been�possible�without�the�commitmentand�contributions�of�the�following�individuals:
KPMG Sourcing Leaders
Alan�Buckle�(Global),�Egidio�Zarrella�(Global),�Kumar�Parakala�(Global),Kalpana�Ramakrishnan�(US),�Mark�Bownas�(Hungary),�Brett�Hall�(Singapore),Shamus�Rae�(UK),�Viral�Thakker�(India),�Jehil�Thakkar�(India),�AndreasDressler�(Germany),�Hartley�Powell�(US).
KPMG Report development team
Nimish�Thaker�(India),�Shailesh�Narwaiye�(India),�Arpita�Bedekar�(India),�AditiMehra�(India),�Kunal�Jain�(India),�Franziska�Herzig�(Germany),�ElzbietaBogatko�(Germany),�Pranav�Desai�(India),�Nandini�Mehta�(India),�NishaFernandes�(India).�
Report Review and other activities
Hemanth�Sundararaj�(US),�Andrea�Wang�(Hong�Kong),�Anoop�Vijaykumar(India),�Kartik�Ramakrishnan�(India),�Saurabh�Mathur�(India),�Bob�George(India),�Sidharth�Tewari�(India),�Jiten�Ganatra�(India),�Rohit�D’Almeida�(India),Philip�Sallick�(Australia).�
Additional help provided by key individuals to gather the data. Without
their help our report would not have been completed.
Dennis�Gao�(China),�Danny�Le�(China),�Taihai�Woon�(Malaysia),�Tam�MinhPham�(Vietnam),�Tommy�Woo�(Vietnam),�Reginald�Nery�(Philippines),�Jose�CCatequista�(Philippines),�John�Naas�(Canada),�Sameer�Gupta�(US),�LuizCabral�(Brazil),�Hamilton�Hamamoto�(Brazil),�Caroline�Hausen�(Brazil),Cristian�Garrido�(Chile),�Claudia�Villegas�(Chile),�Humberto�Salicetti�(Chile),Hugo�Garcia�(Mexico),�Carlos�Lopez�(Mexico),�Andres�Behar�(Argentina),Boris�Durou�(Argentina).
Acknowledgements
Contacts
Egidio ZarrellaGlobal Partner-in-ChargeIT AdvisoryHong Kong+852 2847 [email protected]
Kumar ParakalaGlobal Head of Sourcing AdvisoryGlobal Chief Operating Officer, IT AdvisorySydney Australia+61 2 9355 [email protected]
Kalpana RamakrishnanAMERICAS LeaderSourcing AdvisoryLos Angeles, United States of America+1 714 850 [email protected]
Mark BownasEMA LeaderSourcing AdvisoryBudapest, Hungary+36 1 8877 [email protected]
Brett HallASPAC LeaderSourcing AdvisorySingapore+65 6411 [email protected]
Viral ThakkerIndia LeaderSourcing AdvisoryMumbai, India+91 22 3983 [email protected]
Shamus Rae UK LeaderSourcing AdvisoryLondon, United Kingdom+44 20 [email protected]
Andreas DresslerGermany LeaderGlobal Location and Expansion ServicesBerlin, India+49 30 2068 [email protected]
Jehil ThakkarIndia LeaderGlobal Location and Expansion ServicesMumbai, India+91 22 3983 [email protected]
Hartley PowellAMERICAS LeaderGlobal Location and Expansion ServicesCharlotte, United States of America+1 704 335 [email protected]
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